Select Budget Committee Session I 10/15/25

Oh, there it is.

Good morning.

The October 15th, 2025 Select Budget Committee meeting will come to order.

It is still 930 a.m.

I'm Dan Strauss, chair of the committee.

Will the clerk please call the roll?

Council member Saka?

Good morning.

Go Mariners.

Council member Solomon?

Here.

Council Member Hollingsworth Council Member Juarez Council Member Kettle Council President Nelson Present Council Member Rink Present Council Member Rivera Chair Strauss Go Mariners Seven present.

Thank you.

It is a good day to be here in Seattle working on behalf of the people.

We've got a half full chambers this morning, so we'll be getting into public comment in just a moment.

We have five items on the agenda today, all of which are to be presented by council central staff.

We have an introduction and process overview to remind us where we are in the budget and where we're going.

We have an overview of the 2026 proposed budget adjustments at a large higher level and analysis on the general fund balancing and sustainability.

We also have a presentation on the Seattle Department of recreation as well as Seattle Department of Transportation.

Before we begin, if there's no objection, the agenda will be adopted.

Hearing no objection, the agenda is adopted.

We are gonna move directly into the hybrid public comment period.

We're gonna take everyone in chambers in person first and then we'll move on to online.

During this budget season like last year, we'll be using a formula to help make public comment more consistent and predictable for those participating.

Under this formula, if there are fewer than 30 people signed up, each person will receive two minutes.

If there are between 30 and 60 people, Each person will receive one minute.

We are joined by Vice Chair, Council Member Rivera.

This means today, and clerk, can you confirm we have fewer than 30 people this morning?

So far, yes, fewer than 30.

If we get a big rush, we'll have to readjust and drop down to one minute, but each speaker will have two minutes today.

Speakers will be called in the order in which they registered and you'll hear a chime when 10 seconds are remaining.

So when the chime goes off, you can just wrap up your comments.

We will mute the microphones at the end of the allotted time.

Something that even us as council members sometimes forget is that you need to get the microphone very close to your mouth.

so just remember that if you're standing there, those microphones are adjustable.

Steve Rubstello, you're up first.

I'm going to call out the names here if you want any of these three microphones work.

I suggest this one in the middle.

We have Steve Rubstello, Kara Williams, Molly With that, Mr. Rubstello, welcome, good morning, go Mariners.

Well, I may not use the two minutes.

What I have is a simple request.

In these times of revenue not rising as fast as costs, It might not be a bad idea to do what the state periodically did, was put out a list of people who are not paying all of the exemptions you have made.

So we can take a look and sometimes decide whether these really belong on that list or not.

Is it really worth it in the times of crisis?

and the other thing I would suggest is that the council think about trying to mold itself back into the city.

Since Nichols, we have not seen the city council seriously attached to the departments when the council's committees were parallel to the city departments and you had at least one person, a chairman, who knew it very, very well on your budget committee and generally a couple of others on the committee who knew it pretty darn well.

Right now, the city council has not been as tied into really what the city is doing.

Thank you.

Thank you, Mr. Rubstello.

Up next is Kara Williams, followed by Molly H. Kara, good morning.

Good morning council members, it's good to see you.

My name is Kara Williams and I work at the Low Income Housing Institute.

I am here to express strong support for the proposed 11.4 million in rental assistance and request that 10 million additional dollars be allocated to the Office of Housing portfolio to support non-profit affordable housing providers.

My belief that housing is a human right guides my work at Lehigh.

As an advocate, our clients and clients across this city need help maintaining their housing.

As much as Seattle needs more affordable housing, its existing affordable housing system is also in need of your support.

These rental assistance dollars will help stabilize households before they fall into homelessness and ensure providers like Lehigh can continue to operate buildings that keep people safely housed.

Further, every dollar spent on rental assistance prevents increased need for emergency shelters, healthcare, and crisis services.

This is an important investment in housing stability for the City of Seattle, especially given the many uncertainties in federal funding right now.

I ask that you please allocate 21.4 million total to tenant-based rental assistance.

Thank you so much.

Thank you, Kara.

Up next is Molly followed by Marta.

Good morning, Molly.

Good morning, council members.

My name's Molly Hardiman and I work at the Low Income Housing Institute.

I'm here to express strong support for the proposed $11 million in rental assistance and to request that an additional $10 million be allocated towards tenant-based rental assistance for nonprofit housing providers.

Our city's affordable housing system is under incredible strain.

We see this every day in our work and hear the stories of those in our community struggling to pay rent.

Housing providers are grappling with rising operating costs while tenants, many of whom are seniors, families and individuals with disabilities, are still struggling to recover from the economic and housing shocks due to the pandemic.

This funding is a critical and preventative investment that will help stabilize households before they fall into homelessness and will ensure providers can keep people housed.

Given the impacts of federal budget cuts for nonprofit providers, it is especially important for the City of Seattle to prioritize this funding and stand by its community members.

These preventative measures will help keep people housed and reduce the need for more costly and reactive interventions in the future.

I urge you to please allocate a total of $21.4 million to tenant-based rental assistance.

Thank you.

Thank you.

Up next is Marta, followed by Tan and then Jason.

Marta, good morning.

Good to see you.

Thank you council members for taking into consideration the community needs shared here today.

My name is Marta Quirana and I'm the community engagement manager at Low Income Housing Institute.

First, I would like to thank Mayor Harrell and his office for allocating funds for tiny house villages in the 2026-2027 budget.

These tiny homes are going to lift the needs of our unhoused neighbors by creating safe spaces that lead to permanent housing.

Additionally, Lehigh would like to thank council members for the $11 million allotted for rental assistance, as these funds will be a great help to many who are overburdened by rising expenses of food, medical bills, and a million other basic necessities.

Unfortunately, this funding is not enough to keep all of those people in this position from sliding into homelessness.

We as a non-profit housing provider have a duty to speak up for the needs of those facing the fear of being unhoused.

We ask that you add 10 million dollars of rental assistance funding to directly support the Office of Housing, non-profit, affordable housing portfolio, thus keeping many Seattleites protected.

We ask that council members dedicate 21.4 million for tenant-based rental assistance to keep Seattle community members housed.

Housing is a human right and we ask that you help us make it so.

An ounce of prevention is worth a pound of care.

Thank you council members for listening to our request and the needs of our neighbors.

Thank you.

And up next is Ton followed by Jason and then Stacy.

Ton, good morning.

Good morning, City Council.

My name is Ton Makareg and I live in the Central District and I work for the Low Income Housing Institute.

To echo my colleagues' comments, I'm expressing my support for the $11.4 million in rental assistance and ask that $10 million more be added to support non-profit affordable housing portfolios.

Affordable housing providers are struggling and our clients need your support.

Many households are on the brink of losing their housing and 21.4 million in the budget will help stabilize these at-risk households.

Also, with federal cuts, many households are facing increased food insecurity, echoing the need to preserve our current food and meal programs.

As a nonprofit, we have a duty to advocate for those facing homelessness.

Please add an additional $10 million of rental assistance funding to support affordable housing, keep Seattleites protected, and ensure that housing is a human right.

Thank you, Ton.

Up next is Jason, Stacy, and then Keegan.

Jason, good morning.

Good morning.

My name is Jason, and I am a member of Ted City 3. I'm here on behalf of my community, and we're in a site crisis right now, and I got first on the list because I have a job, fortunately, to go to, so I have to get there now, and Most Americans are two paychecks away from being homeless, so I'm just asking for your help.

Thank you.

Thank you, Jason.

I hope you're not late for work.

Appreciate you coming down here today and taking your time to speak to us.

Hello, my name is Stacy Sorenson, and I want to thank you for giving me the opportunity to speak.

Stacy, a little closer to the microphone.

Thank you.

TenCity 3 has to move in 10 days.

10 City 4 has to move in just four weeks.

Both camps have no place to go.

That's 200 men, women, and children about to lose our only home.

Help us find sites.

We can't afford to lose shelter.

And my own personal story, I was forced out of my apartment because they raised the rent so much from 2021 to 2024, they more than doubled the amount, which resulted in a back rent amount that exceeded what most departments would deny me when I applied.

So I was lucky to find the tent city, the share wheel tent city three.

And now I'm facing possibly living on the streets if we don't get help from you.

This scares me the most out of anything I've had to face.

And I'm so grateful for the shelter that's been given me.

Please don't take it away.

Thank you.

Thank you.

Thank you for coming, Stacey.

Up next is Keegan followed by December and then Hillary.

And I'm gonna suggest you use the other microphone.

It's just, it's closer, yeah.

So yes, my name is Keegan.

TenCity3 saved me and my partner's lives.

We had been turned away from every form of shelter that we were looking for.

We were considering a double suicide, but then we just happened to stop in front of TenCity3.

They took us in immediately.

We've made and reconnected with so many friends.

I worry that a lot of other people will end up making that decision if Tent City 3 is dissolved.

Thank you, Keegan.

Up next is December.

Hi.

Hi, December.

Okay.

Good morning.

Okay, I'll go first.

Okay.

Hi, my name is December.

I was part of a DV situation.

I come from the state of California.

I haven't lived in Washington for no more than like a year and a half.

I put my husband in jail.

I've been with him for seven years.

Tent City means a lot to me because if I didn't come here, my kids would be homeless.

We'd probably be in the streets.

We don't know anybody, really.

My son's disabled.

I brought my 13-year-old daughter to that.

Tent City means a lot.

We're able to still go to school.

We have a decent place.

We could stay recovered.

We're not roaming the streets.

We're not dealing with drug addict people.

We're not in any kind of harm.

It means a lot to me because of the fact that it is a good program to where you don't end up on the streets with nothing.

your kids are taken away, you're desolate, you're broke, your kids are your world, that's all you need.

It means a lot because coming from a 13 year old, it shows a kid through DV that we can do it, we don't have to be with my step husband for a place to stay, even through intimidation and stuff that I have somewhere else to go instead of going back to DV so we can end up dead.

So this means a lot to us.

Thank you guys.

Thank you, December.

And up next is Hillary.

And just for the record, Councilmember Hollingsworth came.

Yeah, this is my daughter.

I put her on the board with me.

This is Gabrielle Malone.

Sure, we'll just have you sign in again.

But since you're right here, we're going to have you go and Gabrielle Malone.

Is that correct?

Great.

My name is Gabby.

Ten City 3 means a lot to me.

Me and my family have come from a domestic violence home.

We had left our stepfather that we have been with ever since 2018. I am currently 13 years old.

Next month I will be 14. This is my first shelter.

Ten City 3 means having at least something over my head and I am very grateful for that.

Thank you.

Thank you for coming and sharing your story with us today.

And Gabby, if you could sign in just so we've got you on the record.

Good morning, Hillary.

Good morning.

Go Mariners.

Good morning.

Counsel, thank you for having me here.

I am for Tent City 4, and I have a personal story.

Me and my husband came from Colorado, and my husband was in ICU when we first got here, after he got out of ICU.

The social worker told me about a Presbyterian church, which is ran by Cher and Will, and I went in there and told them everything and they were able to get me closer to him immediately and then they told us about Tent City 3 and Tent City 4 and we've been in it, but Tent City 3 only has 10 days.

Tent City 4 only has four weeks before we have to change and we don't have housing and we need it because if it was your mother, your father, your grandbaby, your sister, your brother, you know, everybody, you don't want them to be out there dying.

You know, please help us fund.

Please put us in your budget and help us.

Thank you for listening.

Thank you, Hillary.

Up next is Lillian followed by Allen, Sun, Anitra, Cassie, and Dung, and then we'll take the new sign-ups.

Good morning, Lillian.

Good morning.

My name is Lillian Phoenix.

I'm a transgender woman, and I am disabled.

And I moved up here to Washington to escape from an abusive home.

And when I arrived here, I had $10,000.

I thought everything would be fine.

I found what I thought would be a dream job, working at a dog daycare, taking care of animals.

But I had to give it up because no leasing agents would answer my call.

Eventually, I ran out of money and I could no longer stay at the hotels I'd been in.

I was using a backpack with all of my stuff in it as a pillow under an abandoned bagel shop with a terrible Mylar blanket that did not keep me warm.

I couldn't sleep and a man came up to me in the middle of the night with a card and asked if I would like to trade shards for a blanket or a pillow.

I didn't know at the time that shards meant methamphetamine.

I didn't want to know.

But thankfully, I found Tent City 3. They gave me a place to stay.

They gave me a community.

They made me feel accepted and safe.

Tent City 3 is helping a lot of people, and we have 10 days before we have to move.

We need your help and we need you to add to the budget just so that we can survive.

I don't want any of these people to go through that night.

I don't want any of these people to be freezing under an abandoned shop hoping they survive the night, terrified that someone they don't know will come up to them and harm them.

So please, I ask you to see it in your hearts to help these people, especially the children.

Thank you.

Thank you, Lillian.

Up next is Alan, followed by Sun, and then Anitra.

Alan, good morning.

Hi, good morning.

My name is Alan Lapine, and I live at 1063. As I'm sure you're all aware, there's been a long-time tagline for share in wheel, is that without shelter, people die.

Okay, so far this year over 200 people have died who are unhoused.

That's nearly one per day.

That is one per day too many, by far.

I don't think any of you are familiar with the tactics of Mr. Morrow in the past.

He was the founder of the 10 cities in 2000. I was here before with Tent City in 2011, 12 and 13. Got right back into building myself up, living, creating things.

And what a lot of people don't realize is you're all, all of us, any of us, anybody is one bad day away.

One flat tire that causes an accident.

One slip in a grocery store.

one cough and you break a rib.

I mean, something that is going to start to spiral you downward, that you can't stop, you can't do anything about it, no matter what you try and do, you can't stop it, until you hit rock bottom.

And anybody and everybody is that one day away.

You know that most Americans are two paychecks away from being homeless themselves?

Everybody in the country.

Things have got to be done.

We've got to do something.

You know, it was cold the last two nights, y'all.

I don't know how you guys felt, but I was freezing.

Literally, it was 39 degrees and 41 degrees the last two days.

In a tent, that's pretty cold.

We are in dire need.

We have 10 days and we have to be out of where we're at and we've got nowhere to go and no idea what to do and we're training, but we need help.

Okay, thank you.

Thank you, Alan.

Up next is Sun Anitra Kassi.

Sun, good morning.

Good morning.

My name is Sun Halbo.

Right now, I live in Tennessee Creek.

And so at the end, I'm just running moving.

And I don't know how I live.

I don't, right now, if they're moving, I don't have a place to live.

Right now, can you guys help me the place to live?

You know, like tiny house.

or the housing, you know, something for the high living.

Thank you.

Thank you, Sun.

Up next is Anitra Cassie Dung, and then we'll take the most recent sign-ups and then transfer online.

Good morning, Anitra.

Good morning, Dan, and everyone else.

We had a big turnout today, 10th City 3 and 10th City 4. Later today, at noon, women in black stands another vigil for 21 people who died unsheltered or by violence.

Two of those deaths were suicide.

a lot of homeless deaths are deaths of despair.

That includes the overdoses.

Tent cities provide safety and shelter, but also community.

As you see, as many people have said, community is as essential to survival for human beings as anything else, as food and water, as air itself.

These people want to stay together not just stay in their tents, but stay together.

And they need your help.

This won't even cost any money.

Just find a site for Tent City 3 and a site for Tent City 4, and you can save 200 lives for free.

Thank you.

Thank you, Anitra.

Up next is Cassie and then Dunk.

Cassie, good morning.

Go Mariners.

Good morning, Council.

Thank you so much for having us today.

My name is Cassie Clayton.

I'm in District 7 downtown, 3rd and Pine.

Across the nation this Saturday and also on November 4th, the people are going to be making our voices heard very loudly.

We want community.

Belonging is a human right.

We care for our neighbors, every neighbor.

all of our tent city neighbors.

That care is not going to come from the federal government.

That has been very clear for years.

And it's not going to come if we keep taking money out of the jumpstart tax and using it for things like surveillance instead of what it is supposed to be for, which is housing and human rights.

Seattle's own revenue stabilization work group reviewed 63 different ways to get new ideas for revenue streams.

They delivered nine progressive options that could close our budget gap sustainably without cuts to care.

The work group explicitly noted ones that could increase the jumpstart tax without going to Olympia.

These could make immediate changes, very quick changes, by lowering the total payroll threshold and lowering the salary threshold.

So it doesn't seem like we have a problem in where money can come from, we are just not collecting it.

And that is impacting all of our neighbors that are here today, that have been very brave to show up, who do not know where they are going to live in a month.

That is a travesty in Seattle.

So if we're so eager as leadership in Seattle to collect and to surveil and to enforce a policy, we could start doing that by making sure companies are paying the jump roll tax and including new companies that could be paying the jump roll tax.

So I'm here to ask that we feed the people, not fascism.

We pass and go for progressive revenue, not wasteful surveillance.

And we invest in these nine different ways that the solidarity budget has shown us a way forward.

Thank you very much for your time today.

Thank you.

Up next is Dung followed Yvette, followed by Yvette.

And then we'll transfer online.

I see that all online present, people are present.

Good morning, Dung.

Good morning.

Hi, my name is Long Pham.

Dung, I'm going to pause.

We can reset the time.

If you want to move that microphone right up to your mouth like you're a rock star, like Jagger.

Okay.

Hi, my name is Long Pham.

The first time I have to say thank you for the because last month I have no place to live and they just tried to help me get the place to live and the place to eat.

And now we have only 10 more days to be moved and we don't have where we move and we don't have no place to live.

And I hope you guys have seen all the people of the city have the place to live and save their lives for the winter.

Thank you.

Thank you, Dung.

Last in person is Yvette Denish.

Yvette, good morning to you.

Well, good morning.

First of all, thank you for the tent city residents for showing up and advocating for yourselves.

Keep it up, please keep it up.

and also I sent all of you an email regarding innovative solutions to homelessness from Germany for various pods that are self-contained, they're heated, they've got power and they're solar powered and they're innovative and also I've sent you the same link to if you decide to go with something like that, at least investigate how much it costs to think of collaborating with the Seattle Central College Trades Division on helping to build those such pods.

And I also want to thank you that the sweetened beverage tax helps feed the community with many of these urban farms by providing organic food to preschool and other residents in our neighborhood.

And then, let's see.

Oh, and Joy, for your video about the Skid Row Mayor, who essentially said, if you're part of the problem, then you also need to be part of the solution.

And that's all I have to say today, and thank you for keeping up the good work.

I appreciate it.

Thank you, Yvette, and thank you for the nice card that you left.

I'm sure I'm not your favorite.

I bet you gave one to everyone, but I appreciate you leaving us a note.

I'm Yvette's favorite.

For the record, Yvette says true that.

With that, we're going to move to online public commenters.

Julia Buck, Matt Wright, BJ Last, and Council Member Hollingsworth, you are welcome to have last word at the end of public comment if you would like.

I have nothing, but I do believe I'm Miss Yvette's favorite.

Thank you.

Yeah, okay.

We'll battle that one out later.

With that, Julie, I see you're already here and off mute.

Thank you for your patience, your convenience.

Take it away.

Good morning.

Good morning.

I'm president of Seattle City Council District 6, and I am calling because I have a concern about Mayor Harold's budget insofar as it redirects money from the Families Education Preschool and Promise Levy and uses it for the general fund.

It also cuts the $20 million in mental health funding from the city budget that students, parents, and educators advocated for and won in 2023. I am concerned about this for a number of reasons.

if the mayor's budget is taking 26% of the FEP levy and moving it to the general fund, what that effectively means is proportionally $6.3 million of education dollars are being raised.

It's a problem given that Seattle Public Schools already face something of a funding crisis state level.

to make sure that all the education dollars in the FAC levy go towards...

Can you pause the time?

We're gonna give you another minute, Julia.

You're breaking up so much that it's hard to hear you, so we're restarting your time for an additional minute, which was a little bit more than you had.

Just wanna give you the opportunity to speak.

Can you hear us?

Julia, I'm gonna ask you to call back in.

We've got two more speakers, so there's about four more minutes before you need to come speak to us again, and we'll put you right up.

If Matt would press star six, we could take him next as a remote speaker.

Great.

So Julia, call back in.

Matt, I see you're off mute.

Welcome, Matt Wright.

Thank you.

My name is Matt Wright.

I'm a resident of District 3, represented by Miss Yvette's favorite, Joy Hollingsworth.

And I'm here to talk about the public safety budget.

Not too long ago, Mayor Harrell signed an executive order to protect Seattle from federal troops.

Though this is an unenforceable order, the nature of public safety has changed somewhat in the last few months.

We're seeing a lot of federal overreach and there's a feeling that we need to protect our citizens.

Basically, the social oppression and state violence that we see in cities like Chicago.

What we know about social and social oppression and state violence is that surveillance is a very powerful tool for those things.

I just urge the Budget Committee to consider reallocating the projected $6.8 million that the expansion of CCTV and the Real-Time Crime Center will cost us and use that money to help with other issues represented in the nine points of the solidarity budget.

I mean, we've heard from a lot of people that are desperate here today.

I think that $6.8 million could really help.

And I believe that this expansion of surveillance essentially unlocks the back door for the very thing that Mayor Harrell has that he wants to protect us from.

Thank you for considering.

Thank you, Matt.

And up next, we have BJ Last.

BJ, I see you're already off mute.

And if you want to let Julia know that we still can't hear her, if she wants to call back in, we'll call her up right after you, BJ.

With that, good morning, Mr. Last.

Morning, my name is BJ Last.

I'm a homeowner in Ballard, District 6. So I was looking through the budget that all the items that are supposed to be to protect people, to make up for changes that the federal government, due to budget cuts and all that, I'm looking at the money for food access and Office of Immigrants and Refugee Affairs.

This is all one-time money, which means this isn't going to be back next year.

That really needs to be changed to be ongoing.

It's ludicrous to think that the level of need is somehow going to be lower next year.

This should not be something that community members have to come back for and start fighting again next year in the budget.

So that absolutely needs to get shifted to being ongoing funding as opposed to one time.

I also want to point out that all of that money combined that's supposed to be to protect us is less than the city is actually spending on sweeps.

We've heard from a lot of people at 10 city three, look, There isn't enough housing, there isn't enough shelter right now in the city.

So until we have enough shelter and housing, we should absolutely let people, like we should not sweep them, sweeps kill people.

If you go around the city right now, you see a whole lot of people that are stuck having to sleep really rough outside because they can't even have a tent because if they set up a tent, they quickly go and get swept.

It's a lot colder if you're trying to sleep outside and you can't even have a tent.

So that is a massive issue and we really need to reallocate that money.

Similarly, we also are giving $26 million for SPD for more COPs.

They already have this money in their budget.

They've been reallocating that money for years.

If they are asking for this additional money, they need to say, what have they been using all this salary money that's been sitting in their budget for years when they had those positions vacant?

It's, I believe, $28 million at least of that money that they've said that they've already allocated to other expenditures.

That needs to be a question so people can actually know what is that money going to?

You know, a lot of it's going into surveillance, which does not keep us safe.

Additionally, it's disappointing that so much of the theft levy is being used to backfill items.

Thank you.

Thank you, Mr. Last.

And not least, we'll try Julia Buck one more time.

Julia, I see you're still here, still off mute.

And I'm going to ask our clerk to double in IT just to double check.

She hasn't tried to- She should be able to speak.

Are you there, Julia?

Hello, yes.

Can you hear me?

Yes, we can.

So you had 40 seconds left on your clock when we were having trouble.

We've given you a full minute to go from here.

Good morning.

Oh, okay.

Good morning.

I'm sorry.

I will finish my comment as quickly as I can.

I'd also like to highlight that in 2020, the school board enacted a moratorium on escrows and promised our students they'd explore alternative leasing in schools.

However, since then, while some schools have piloted alternative policing, the contracts or rallies remain with just a few schools and have yet been scaled up to meet the citywide demand for community alternative policing in schools for violence prevention.

I would like to encourage capital to carry it through the promise to our students for a holistic safety program.

and that requires adequate and sustained funding for evidence-based programs.

Thank you for your consideration.

Bye-bye.

Thank you, Julia.

With that, just double checking, no one else has signed up in person.

Is that correct?

Correct.

Thank you.

Seeing as we have no one else virtually or physically present, we will move on to the next agenda item.

Clerk, will you please read the short title of our first agenda item into the record?

Agenda item one, introduction and process overview.

Fantastic, and if you could just read everything up until SDOT into the record at this time, that would be helpful.

Or is that the only presentation that is just chopped up into a couple different bullets?

One second, I'm not sure what your...

I believe the other presentation is that we will have a general fund and jumpstart fund analysis for the morning.

Right, so agenda item one is the introduction and process overview and item two will be the overview of the 2026 proposed budget adjustments and item three will be the general fund balancing and sustainability analysis all provided by central staff.

Fantastic, that will get us through the morning.

Colleagues, we have adjusted our projected lunchtime for 12.30 to 1.30.

This allows everyone to take one last stop at City Grind, should you need to, that closes at 1 p.m.

and before we begin with this presentation, I want to just share that now is the time to share amendment ideas with colleagues, to seek co-sponsors, and to put ideas to paper.

Last year there was a small discrepancy regarding co-sponsors, so this year I will also be coming around to confirm individually with you that you have co-sponsored items.

This is not to be punitive, we will be providing the requisite grace time as much as we can allow to seek different co-sponsors.

This is just a way for us to ensure that there is broad support on the dais for the idea.

So if you co-sponsored something and wanna remove your name, that main sponsor will have time to find a new co-sponsor.

If you're the main sponsor and somebody drops off, you also have time to go get a new co-sponsor.

And then once they have been submitted, I'll come back and check with everyone.

Again, these proposals do not need to balance against a funding source at this time.

That will come later.

you will need to submit amendments and cosponsor, or you can submit amendments and cosponsors at any time.

The web form closes next Tuesday at noon.

That is a hard stop.

And so it is better to submit an idea and to drop it, to leave it, rather than to not submit it.

So as we move into this section of the budget cycle, that we are about to have this presentation on, central staff will be presenting the issues they have identified through their analysis of this budget.

It is a dense document, and we have some of the best analysts in Washington State, so I'm excited here.

And so with that, we will begin this section of the budget cycle and presentation with an overview, just a where are we, what are we doing right now, where are we going from here, and with that, I'll turn it over to Director Noble and Calvin Chow of Central Staff.

Welcome.

Thank you, Chair Strauss.

As they say, flattery will get you everywhere.

Yeah, so I'm going to just take a few moments to give you an overview of what to expect over the next three and actually four days, counting next Monday, a sense of what we're going to be presenting to you.

As Council Member Strauss has described, we are now entering what we've called stage two or step two of the budget process.

Just looking at your calendar here, it's the first of these blue sessions, these three days here that will be, as I will describe, a discussion of policy considerations that central staff have identified, followed by next Monday an update to you on the revenue forecast.

I'll give you some more detail on that.

Again, just going to give you a sense of where we are.

We will then move relatively quickly.

Things start to pick up now in terms of the pace of activity here at the Budget Committee.

We'll give you a preview of the next phase, which is shown in purple.

I love the color thing here, which is a discussion of your specific budget proposals, your potential amendments to the budget.

But let me first talk about step two.

Again, we're going to do three days of what we've described as policy consideration or issue identification.

Today, the morning, is going to be focused really at a high level on the budget overall.

You have two presentations following mine.

One is from Eden Cizic, and I should note that Eden will be presenting remotely.

He's getting over a little bit of a cold and better for all of us, public health thoughts in mind.

So he'll do that.

And his look is at the budget overall.

We tend to focus on the general fund and the PET because those are the most flexible city funds, but I think it's also useful to take a look at the big picture.

Edwin will do that.

We're also going to use this as an opportunity to cover a couple of cross-cutting issues.

Our analysis is generally focused department by department, but there are a couple of policy areas of emphasis in the mayor's budget.

In particular, we're going to talk about the World Cup and the expenditures associated with that, and then also graffiti abatement and the expenditures associated with that.

There are significant proposals in both spaces, and they're cross-departmental, so this is a good way to cover those.

He's also going to talk a little bit about the Capital Improvement Program, the CIP.

Again, this is not generally an area of particular focus, but there are specific projects I know of interest to Councilmembers.

And again, his will be a high-level overview.

Next presentation will be from Tom Mikesell, and it will focus specifically on the general fund, also on the payroll expense tax.

Given current policies, those are relatively fungible, almost completely fungible revenue sources.

And this is really a focus ultimately on the sustainability of the budget proposal.

And you'll see it's a very technical presentation, at least in parts.

It's really an attempt, not more than an attempt, It's an exercise in tracking the city's revenues and understanding how it is that we had a balanced endorsed budget, how that came out of balance with the revenue forecast updates in April and in August, and how the mayor has rebuilt balance proposal for 2026 and the implications of some of what has been proposed for 2027 and beyond.

So again, and there are in that presentation a number of potential policy considerations and options for you in terms of some direction and actual actions that we could take with respect to the budget.

So those are kind of the big elements for today.

Then we will break into, we will start department by department.

This is a schedule that shows you what we're planning in terms of department-level presentations starting this afternoon with Department of Transportation and Seattle Parks and Recreation.

I won't bother to read the rest of it.

You can see it.

I want to focus for a moment on the final day here on Monday.

In the morning, the City's Revenue Forecast Council, which includes two council members, Chair Strauss and Council President Nelson, We'll receive and approve the revenue forecast from the Independent Office of Economic and Revenue Forecasts.

And then in the afternoon, we'll bring Jan Duras, who's the Director of the Forecast Office here, myself and Dan Eder, to walk you through what the revenue implications are of that forecast and a high-level description of the economic changes that are driving it.

That's what's laid out for the next three and four days for you.

On that last day, we will post to the agenda the policy consideration papers for the departments that aren't listed on this schedule.

So we have written up policy consideration analyses for all the departments.

They're not all worthy of presentation.

At that last meeting, I will offer some, actually probably on Friday, offer some direction about which of those you might find most interesting, ones where there are some policy considerations that you may want to consider.

Again, we had to balance on the time we have here at the table and the areas of interest.

and then just to preview, again, because the calendar moves relatively quickly after that, step three will be the presentation of your individual proposals.

Ben, just real quickly here, taking a little bit of a deep breath, step three is in two weeks from now, correct?

Correct.

Great.

Deadline is for initial proposals is October 21st.

And again, those don't have to be fully baked, but we need to get these ideas on the table for central staff to start working up those analyses.

So I wanted to highlight that deadline in particular.

The presentations will then come follow in weeks five and six as described.

So, and Chair has actually covered most of what's here, so I just wanted to highlight what's that deadline for you.

And those, again, those individual policy proposals will become part of what is the balancing package that Chair Strauss will propose the week following that.

And director, before you move on, colleagues, if you've got questions along the way, just raise your hand.

We're gonna take questions along the way.

I wanna note a change that we've been able to make in process, in the budget process from last year.

We did not have the system set up for co-sponsors.

So when an item came up, in committee, we didn't have a good process for people adding their name.

We've changed that this year.

So if somebody puts a main sponsor with two co-sponsors puts forward an idea in open session, you can add your name to it.

So just wanted to highlight that now so that you're prepared for it as we get there.

I also want to highlight something, just anticipating a little bit of tension to be candid, which is when we write up the budget proposals, we will provide, Central staff will provide a summary that's designed to be an informative summary, not necessarily a persuasive summary, because that's a document that's really meant to serve all of you.

As those issues come up here for discussion, I have seen and do not doubt your persuasive abilities.

So that'll be the time for you to make those cases.

And again, we're going to try to be fully informative, but you can understand there's a balance there to be struck.

So I appreciate your acknowledgment of that.

But we're again looking forward to that work.

As folks, I mean, right now the team is working hard to meet deadlines to make these, to develop these papers and to make these, to develop the PowerPoint slides you see.

As those are completed, they are then ever more available to engage with you about potential ideas.

So the 21st is the last day to bring us an idea, but you can bring them sooner than that.

And in particular, as the presentations are completed, staff will then be available.

Some have multiple assignments, so they may still be working towards the next one, but you get the idea.

So we look forward to that engagement and look forward to it as timely as possible.

Again, just looking at the calendar and how relatively quickly things begin to move.

Before I turn this over to Eden and then to Tom, let me just say a few things by way of introduction at my level, if you will.

Again, we will get the revenue forecast next Monday.

Just to highlight to you that uncertainty is really the name of the game right now in the economic world.

We saw some initial slowing in the labor market, in particular in August and September.

and we're now meaningfully driving blind, if you will, in that the shutdown of the federal government is actually depriving us of some key economic data that could help inform an understanding of where we're headed.

There was to be a jobs report last Friday, I believe.

I mean, it was a Friday before, but either way, it was not published.

So it gives you an idea of the compounding uncertainty there.

In terms of the overall budget situation, the mayor has proposed a balanced budget for 2026. And again, Tom will provide you much more detail in this space.

But I think one of the key issues, and you'll hear it today, is sustainability.

So that although it is balanced for 2026, the budget on a projected basis is deeply out of balance for 2027. So that is an issue that you'll need to consider as you look through this.

It's unclear to me whether or not actually all of the initiatives that are proposed will ultimately be implemented because some of them, many of them rely on one-time funding.

So it'll be a difficult decision whether to move forward with those in the face of that deficit.

And we'll talk some more about that as well.

And again, it's at a high level, and Tom will return to this theme.

The mayor has balanced the budget for 2026 in part by bringing new revenues to the table.

You just recently approved and authorized a 0.1% sales tax.

But at the same time that those new revenues are added, the projected budget deficit has actually increased in terms of the out years.

So again, emphasizing the question of sustainability and where we are headed.

And then as a last point, and this is just some ways of interest, last year I had highlighted some sort of ongoing challenges and went back to look at that.

And interestingly, I would argue they are all the same challenges, which only gives you a sense of how difficult some of this work is.

So I highlighted budget sustainability because I think it is an even more important issue than it was last year, given the overall structure of what's been proposed.

But I say that knowing that at the same time the city faces ongoing issues with homelessness, with housing affordability, with public safety, with downtown recovery, which I really, again, I'm not trying to pick one neighborhood over the other, rather downtown recovery is sort of a measure of economic vitality locally and economic activity locally.

So those issues remain as you begin and consider this budget.

So with that, and without questions, I'll turn this to Eden, but it looks like Chair Strauss has some words.

Yeah, before we move on, I'll stay on this slide for now, and then we'll go back to the first slide.

Briefly, looking at the ongoing challenges, bringing us back to where we were at the end of November of last year, we had gone through a number of different avenues of creating better budget sustainability, better budget reform through process and content.

What we didn't see coming this year was the federal election, the federal cuts in funding, and the economic volatility.

And that even plays into today, as you mentioned, the jobs report has been delayed.

I believe that there's another inflation report that was supposed to come out today that has been delayed.

So this level of volatility and uncertainty has exacerbated both the need of community members for resources as well as a lack of predictability as far as our own funding sources.

So that change in the last year, while budget sustainability remains something that we have to address, as we said last year, we would continue addressing this year.

We did a lot of hard work last year and much of that was then compounded as Director Noble stated this year with things that we did not see coming.

With that, if we could just go back up to the part about the economic revenue forecast.

colleagues on Monday, the Revenue Forecast Council, this was something that was created as an independent office during the pandemic.

There has been just growing, over the last few years, we've been getting used to how the system works.

It is a forecast council that is governed by two council members and two members of the executive team.

We have been meeting in conference rooms.

Seattle Channel has had to bring their own cameras to set up.

Sometimes the audio is not great.

We've made the decision to come in and use the committee table here in chambers because Seattle Channel is already set up.

The microphones are already set up.

The awkward part is there are only two council members that sit on this council.

And so in the morning session, if you'd like to participate, by listening, more than welcome to.

And in the afternoon, that's why we're gonna bring Director Durris back to our committee where you will have, it's scheduled for the whole afternoon, so you can ask 15 minutes of questions, 20 minutes, however much you want, but the morning will be reserved for that forecast council.

Just wanted to highlight that.

With that, I've got no additional questions or comments.

Colleagues, any questions on the process of where we're at today?

I'm seeing Council Member Kettle.

Chair, I just, it's one of these things we all have very busy schedules and then all of a sudden we have our schedule facing us and we have full day today, Thursday, Friday, Monday, and then we have to coordinate with our colleagues by Tuesday.

So, colleagues, I'm not sure when we're going to coordinate.

and I'm looking at my Tuesday schedule, which is probably now gonna get wiped out.

And so I definitely want to extend this coordination because all of a sudden it's right here, right now.

Thank you.

And the benefit of folks wanna share things as central staff is IDing them of potential amendment ideas, it's a way to start coordinating here in open session.

Councilmember Saka.

Thank you, Mr. Chair, and great point.

Mr. Chair and Council Member Kettle, I intend to start that process today here my office is still working our way through a number of concepts but for me personally I will also be carving out Monday morning and Tuesday morning ahead of the deadline to have individual one-on-one direct conversations with my colleagues on an individual one-on-one basis to to talk about mutual opportunities for collaboration.

So that's what I will be doing personally, because to the points made, time is scant, time is limited between now and the deadline.

So tick tock, thank you.

Thank you, Councilmember Saka.

And as I turn it back over to Director Noble to take us through the presentation, I'll just, again, my favorite phrase of this budget cycle so far is, we are in control of our own destiny.

We can be here till Well, I'm going to close committee at 5 p.m.

because we got a Mariners game tonight, but we could be here till 6, 7, 8 p.m.

or we could get out at 1 p.m.

With that, over to you, Director Noble.

Thank you, Chair Strauss.

We've got our comments, yeah.

Oh, if I stop talking, that's correct, Council Member Juarez.

Uh-oh, mute, sorry.

I'm going to turn this over to Eden.

I'm going to dry slide so if there's any awkwardness on that, that's at my end, not Eden's.

And go ahead, Eden.

Thank you.

Good morning, Councilmembers.

My name is Eden Sisic with Council Central Staff.

I apologize for not being in person with you all this morning.

I'm getting over a cold and I don't want to pass my budget sniffles to any of you.

I need you all healthy this month.

So as Director Ben Noble just mentioned, the goal of this presentation and the associated memo that was distributed yesterday is to provide a high-level overview of notable changes between the 2026 endorsed budget and the proposed adjustments.

So this is an opportunity for us to zoom out and see the big picture from the start of this budget process, assess the potential impacts of the choices to come in a broader sense, and also this sets the foundation and the context for all the individual and more nuanced presentations that will follow for the rest of today and for the remainder of the week.

So I'll start with a high-level budget snapshot of the 2026 proposed budget adjustments and identify the key drivers of expenditure and revenue changes.

I'll cover some interdepartmental activities that were just mentioned, including FIFA and graffiti expansion program.

I'll also highlight some position changes, capital project adjustments, and provide some additional context for all of these items as we go along.

Next slide, please.

Thank you.

So what this charge shows at a very high level is that the 2026 proposed budget totals $8.9 billion across all departments and funds, which is about $125 million increase or just over 1% over the endorsed budget levels.

And in terms of departments, this net increase, the most significant one is in Department of Education and Early Learning, Human Services Department and Seattle Police Department.

and most of these departmental increases are directly related to the addition of new revenue as mentioned today and over the recent weeks.

Let's get into those revenues.

If you can go to the next slide please.

Since we talked about this revenue source the least I'll provide some additional context regarding the FEP levy renewal which is on the upcoming ballots next month and if approved the new levy would increase the 2026 budget in comparison indoors by 120 million dollars which probably sounds like it's a little bit higher than what you'd expect to see because it is.

The endorsed budget includes only six months of funding from the 2018 levy and that's due to how the levy follows the school year instead of the calendar year.

So if comparing the 25 adopted budget, the new levy would reflect an increase of about $70 million.

It is an expanded levy.

and one big change because of that is that the 25 budget, adopted budget included funding from the general fund, the jumpstart fund and sweetened beverage tax in 2025 and the proposed budget shifts those appropriations to the expanded levy and frees up about 44 million dollars of those revenues which were appropriated for other purposes.

The other two taxes you've heard a lot about, so I'll keep this brief.

The B&O tax restructure proposals also on the November ballot which would provide an estimated $81 million of general fund revenue and this funding has been fully appropriated in the proposed budget to mitigate the impacts of federal funding reductions and policy changes.

There is also $51 million to backfill the general fund deficit and to address the general fund deficit, as well as some administrative costs.

There are about $2.4 million and five FTE for administrative costs to implement and operationalize the tax.

Lastly, the newly adopted public safety tax is forecasted to generate an additional $39 million in 2026, all of which has been appropriated and there's a table in the memo and on page two, which itemizes those appropriations by the department and whether it's one time, ongoing, if there's positions associated with the proposal, it captures that information as well.

You'll notice that about 15 million dollars is not included as a new request because it's backfilling other general fund items in the baseline budget.

So the proposed budget includes some interdepartmental city-wide initiatives which are not captured as a whole in individual department overviews.

So I'm going to walk you through some FIFA World Cup activities and the expansion of the graffiti abatement program.

So FIFA World Cup will be here in eight months or 241 days, but who's counting?

Yes, very excited.

We've been selected as a host city for six of those matches.

The 2025-2026 adopted budget included a total of $12.2 million dedicated towards supporting World Cup activities and these funds were set aside in a reserve to be appropriated once specific needs were identified and so in August of this year City Council adopted Ordinance 127265 which appropriated $6.2 million for operating and capital expenses to support infrastructure, safety and emergency preparedness activities.

The ordinance is linked and provides more details on those appropriations by the way and you can read my colleague Tracy's very informative memo if you need a refresher on that in the link.

The 26 proposed budget appropriates the remaining funding, $5.8 million, in addition to some refunding of about $1.6 million in Seattle centers.

If you can go to the next slide, please.

That's for pedestrian safety barriers.

I added this table summary.

you can see all of the specific FIFA items in the proposed budget and in addition to what you see here there's $800,000 of baseline budget to continue the funding of the five temporary positions through the end of next year and the last thing I'll say about FIFA is the executive is currently identifying additional related FIFA related costs and negotiating an MOU with the local organizing committee, which will be submitted to City Council for approval.

And they're estimating that to be at the very latest in early next year.

And additional appropriation for FIFA-related functions will be included in a supplemental appropriations bill pending those negotiations early next year.

Next slide please.

So the city's graffiti abatement program or the One Seattle Graffiti Plan, it's a city-wide initiative focused on graffiti removal, targeted enforcement and assistance for impacted businesses and there's some new support for public art and volunteer clean-up efforts.

the 2026 proposed budgets at around $2 million and 6 FTE bringing the total city-wide expenditures for graffiti abatement to $6.1 million and 22 positions.

The proposed adjustments include funding for graffiti code enforcement, abatement and profession efforts in parks, SDOT and the mayor's office.

and then the chart at the bottom there summarizes the graffiti abatement program baseline and proposed funding in the 2026 proposed budget.

Also includes a net neutral transfer from SPU to parks for all graffiti related general fund expenses which were previously managed by SPU.

There's also a related ordinance that was transmitted with the budget to transfer authority to to enforce the city's graffiti nuisance code from SPU to parks as well.

You'll hear more about this afternoon in the presentation regarding parks and recreation, but just again to preview that and highlight it.

Correct.

You can go to the next slide.

The proposed adjustments include 152 new FTE requests and about 105 of those are general fund supported.

Of those positions, about a third are in care, mostly to support expansion of community crisis responder team and the 911 call center, followed by SDOT's requests for 36 additional FTEs for downtown activation, graffiti abatement that we just went over, Sound Transit 3 and enhanced inspection enforcement and most of City Lights increases related to capital projects and similarly parks.

which includes capital project delivery ads, restroom cleaning and maintenance, and park ranger expansion.

And pages five through seven of the memo go into more detail on the position ads.

But one thing I'll mention here is that personnel costs for city workers across all funds comprise approximately one third of the overall budget and over half of the two billion dollar general fund budget.

All of the additional FTEs, almost all of the FTEs are regular ongoing positions with ongoing budget impacts.

So while some of these positions may be critical to deliver services next year due to the projected annual operating deficit beginning in 2027, Any proposals that add ongoing positions this year should be considered carefully until longer term budget sustainability issues are addressed because decisions to address the projected deficit may require reducing city staffing.

So the city's 2026-2031 six year proposed capital improvement program or the CIP totals $1.6 billion in 2026 which is an increase of about $19 million or just around 1% over the endorsed levels and the increase is primarily driven by debt adjustments most notably shifting the limited term general obligation bond funding for the redevelopment of the Memorial Stadium from 2027 to 2026 due to schedule changes.

And so the six year CIP is $9.4 billion and almost 70% of that is utility funded projects managed by City Light and Seattle Public Utilities.

and mostly funded by rates charged to utility customers.

The SDOT CIP totals $1.9 billion over the six years, which is about 20%, while the rest of the general government departments, we have parks, mostly in parks.

There's some FAS, Seattle Center, Seattle Public Library, and IT capitalized projects account for the remaining $1 billion over the six years.

If you go to the next slide, I have some projects that are increasing appropriations.

These are either due to program expansion, schedule shifts, emergent needs, or scope changes.

All of these are highlighted in the memo and detailed in the individual departments' CIP sections of the policy considerations papers.

With that, I will turn it over to my colleague, Tom, if there are no questions.

But that concludes the high-level overview of the proposed adjustments.

Thank you.

And stick with us, because we've got a couple of questions.

I see Tom coming up now.

Council President Nelson, I see you've got your hand up.

Thank you.

I have a question about the graffiti abatement expansion on page seven.

What does arts do?

What occurs in arts on graffiti?

And I ask because there's an initiative that is happening in Pioneer Square with 10 by 10 foot paintings that are actually made by humans then you can see them being painted and I was it was explained to me as an anti graffiti initiative and I don't know if that is part if if there's any city funding in that and then my other question is where does the contract with uplift Northwest live in because they do have three crews that that perform graffiti abatement, and I am interested in adding another crew.

Thank you for your question, Councilmember Nelson.

So the contract with Uplift Northwest lives in parks.

I believe it's $700,000 currently was allocated for that.

There's another $500,000 for contracting and additional graffiti abatement in parks as well.

and in terms of arts, my understanding is that since the funding for the arts position, it's actually reporting to the mayor's office.

It's in the mayor's office, that position is, however, because it's just passed through funding because it's going through the admissions tax.

So this position is actually in the mayor's office.

And what does it do?

The position or graffiti abatement, I will have to find the specifics on that.

One second.

Well, if it's not easy, just tell me later.

Okay, I can do that.

But I believe they were doing expanded education and going to schools and talking to students about efforts to prevention efforts and educational efforts as well.

But I will send you the full detailed job description after this.

Thank you.

Thank you.

Anything else, Council President?

No.

Thank you.

And colleagues, I was reminded at the end of the last section of budget that I am not using Robert's rules appropriately and correctly.

was suggested that I take a class again.

I am knowingly not using Robert's rules to its firmest point where we're allowing for discussion to happen.

It feels awkward for me to say, and now Tom, and now Council Member Kettle, et cetera, et cetera.

So during this section of the budget, we will have more conversational tone.

As we get closer to amendments, we'll firm up a bit.

With that, Council Member Kettle.

Thank you, Chair Strauss.

I feel all of a sudden I have to be a little bit more formal here.

And I just had a question.

One of these things, it's always about context.

And obviously, we're in the second year of a biennium budget.

Related to past buy-in and budgets going into the second year, how do they relate to what we're seeing this year in terms of changes?

Is this standard or is this greater amount of change or is it in terms of what we're seeing this year compared to past experience?

I don't know that there's a simple answer or an authoritative answer to the question.

The city has had a biennial process.

There was, has been moved in recent years to, so let me back up, biennial process in that every other year there's a proposal that includes an adopted and an endorsed budget.

And the notion is that the endorsed budget is becomes, well, it's not the notion, it becomes the baseline for the second year, provides some level of predictability in terms of a two-year path for the city's finances.

Over the past few years, there's been an effort to make that ever more a biennial process in the sense of minimizing the changes in the second year.

And there's actually been some interest in discussion about going to a true biennial process, such as the county has, where they actually legally adopt both years.

There's then a process of making amendments in the second year.

So we had been sort of collectively, if you will, trying to move towards a relatively more stable second year.

In that context, this is a lot of change.

There are other The electoral cycle probably informs that reality, and may well inform that reality going forward.

But the goal had been to move evermore towards a true biennial process, again, so that it can be predictability.

There always needs to be some response to events, and I'm not trying to pick any side of this, because that's not my business, as you know.

There have been a lot of changes at the national level in the past nine months that certainly were going to justify a number of changes.

That's not all that's reflected in the budget, obviously, as well.

So it has been a goal.

It is not one that we have successfully achieved necessarily, but there's an answer.

Could I just add that the recovery from the pandemic has maybe made that a little more difficult in the last several years to actually push that forward, and really this is a choice for maybe the next year's budget where you might have that opportunity to pursue a two-year legal appropriations.

just for some additional context.

Thank you, Director Noble.

By the way, thank you, Mr. Chow, Mr. Mikesell, and Mr. Susich for your briefing, and I really appreciate it.

And I ask because I think the context is important because it also informs, and I won't have anything, but maybe a challenge to Chair Strauslake.

If we were going to go big on structural budget reform, that would be big to have a true biennium budget.

but I just think it's important.

I see on top of everything else on page three we have some significant changes in revenue that might contribute to this big change that we're seeing this year as opposed to other year twos of biennium budget.

So thank you for that context and thank you for placing that structural budget reform idea in Chair Strauss's head.

I would just add that to move to a true biannual budget, there may or may not need to be actually some changes at the state level.

The city's budget process is actually set out in state law.

My understanding of history is that was established in the early 80s, actually.

and it really changed the way the city does its budget.

It's one of those classic state laws that applies to cities of more than 400,000, meaning us and nobody else.

But we'd have to look at that.

But again, it is a best practice, I think, to move towards something that is more like a biennial budget where there could be some more predictability.

It still gives the opportunity for changes in the second year.

But candidly, having been the budget director, there is a lot of heat, as in the sense of an inefficient engine, associated with processing a whole second year of the budget proposal.

And the city's workforce might be better deployed towards actual delivering of services and policy work and the like, rather than being focused on just the machinations of the budget process, which are significant.

simultaneous balancing across multiple funds and the processing of proposed changes.

It's a lot of work and a lot of time.

Well said.

Councilmember Kettle, anything else?

Words right out of my mouth.

We've been trying to move informally towards that two-year budget process.

And like Director Noble said, it can create a lot of inefficiencies.

We've made a lot of changes over the last five years.

We talked about the Forecast Council.

It's important that we make changes one floor board at a time so that we still have a floor to stand on.

And with that, I will say public health is public safety.

Any other questions on this presentation?

Just before we leave real quick, I've got an update.

Director Eater is in the audience in keeping us informed.

The graffiti position is actually in the Arts Office, not in the Mayor's Office, although as a practical matter, the Mayor's Office is doing a lot of coordination, and that's consistent with the use of those dollars for arts-related activities.

Thank you.

And on slide 10, I'll just make my quick statements.

Under City Light, I'm happy to see that some of these issues are being addressed in the Capital Improvement Program, notably at the Skagit facilities.

Colleagues, I don't know if you recall a few years ago, there was a sourdough fire that burned up and to the powerhouses, the powerhouse in Diablo.

the town of Diablo is currently unoccupied because of potential landslide risk directly there.

And so now is the time to make those improvements as well as the Gorge Dam provides 20% of our city's electricity.

So needing to make sure that those upgrades are completed.

I wanna thank the departments and the mayor's team for putting public restroom winterization and related renovations in here to help and hopefully address some of the audit report.

Additionally, the Green Lake Community Center and Evans Pool Renovation Project, colleagues, you may or may not have known earlier this year, it was determined that the Green Lake renovation would have to happen in two phases, which would have disrupted the park for a longer duration of time and possibly put a longer period of time that members of the community could not access the buildings.

By this small change, they are able to un-phase the project, reduce the construction impact, get community members inside the doors of that community center faster, as well as, I'll just note it, the Green Lake Community Center is in the heart of North Seattle, so District 6, five and four all use this facility.

I would almost say probably equally.

But with that, colleagues, any other questions on this presentation?

Seeing none, we'll turn it over to Tom.

Council Member Hogsworth, no?

No, sorry.

Turn it over to Tom for our general fund balancing analysis.

Here we go.

Good morning, Chair Strauss, Vice Chair Rivera, members of the committee, Tom Mikesell with your central staff.

I'm going to talk about the general fund balance analysis of the general fund in the 2026 proposed budget.

And before I dive in, I'm just going to share So I've been doing this type of work for a long time.

This type of stuff is a second language to me, and I often forget that in kind of relaying the information, this important information to you.

So I'm gonna do my best to try and kind of translate on the fly into terms that kind of are perhaps more familiar.

And with that kind of in mind, This is basically the full physical exam for the general fund.

So during the year we do checkups on it, kind of make adjustments to the health of it.

But then every year there's a new budget and a new opportunity to assess the fiscal health of the general fund.

So that's what this is.

There's a great bit of detail in here and believe it or not, this is me showing restraint.

and trying to filter down to those most salient details.

And then I'll also say that there is a detailed memo that includes more information behind all of the things we'll discuss this morning.

Tom, sorry.

Colleagues, I will say because this is so meaty, we should do questions during the presentation.

So raise your hand if you have questions.

Thank you, Tom.

So the objectives for this presentation are many, but important.

First, so we're going to revisit the 2025 adopted and endorsed budget.

In particular, the kind of health status of the fund at this same time last year after that, that financial plan was adopted.

We're gonna update the current year activities, both the changes that have been adopted by council, as well as those that are submitted with this budget proposal.

We're gonna look at some revenue changes from the forecast that kind of require a little bit of change in course.

and then go into the actual proposed adjustments to the 2026 proposed budget, revenues, expenditures, and reserves, and assess the impact on the balancing status, so the kind of the fiscal health of the general fund.

And as you'll see here, and I believe Director Noble alluded to, the projected deficit, so the health status has gotten a bit worse since our last checkup.

In light of that kind of conclusion and the uncertainty in the economy, we're gonna review the city's primary fiscal reserves to see what the funding status is on those vital resources to help in a challenging environment.

And then finally, touch on the jumpstart payroll expense tax fund, particularly considering that the August forecast hit that fund most drastically.

So just going back a bit into time, about a year ago today, a little after the budget was adopted, this was kind of the assessment of the health of the general fund.

Fund was balanced in 26 and 25. Some of it was with one-time resources.

Because of that, there was a $89 million projected deficit.

So this is basically like saying there's a leak in the tub.

The leak is about $89 million in the future.

If you think about it in kind of the physical health terms, it's like saying right now everything's fine, but your cholesterol numbers are a little bit high, and that might lead to a problem in the future.

So pay attention to it and take appropriate action.

So this is a very detailed table.

No need to go into much of the nitty-gritty of it.

And again, it's explained more in the memo.

But just one thing to think about is that these processes are always, we're always building the car or you all, I should say, are building the car while you're driving it.

So we're making projections, updating projections, making new proposals, adopting new proposals.

It's always that process and this year is no different.

So what this table here shows is the changes to the car of 2025 as we're driving it.

Last year at this time, 2025 was projected, based on everything we knew at that time, to have an ending balance.

So the general fund was going to have $125 million of cash at the end of this year that's then used, or $123 million next year.

Well, those assumptions have all changed since then.

And really at this table, if I can take down through item three on this table, all of those things reflect decisions that have been made to this point.

So excess cash that was identified at the end of 2024, appropriation bills, changes in the revenue forecast, all of those types of things.

Starting with number four, these are proposals that are included with the mayor's budget.

So there's a year-end grant.

So we do three grant bills where new external revenues are accepted and appropriated.

And then there's a year-end supplemental adjustment, so the final spending changes for 2025. In total, those reduce the balance by $17 million.

And then, so another thing, and I'll cover this a bit more detail later, is underspend.

So the 2025 adopted budget included a $10 million underspend.

So this is basically like saying, I'm gonna balance my food budget, assuming that I'm just gonna skip lunch, and it's gonna all work out in the end.

And based on history, I'll show you that that works out in the past, but it has been an emerging practice.

In any case, the mayor's budget says, Ned, $10 million is perhaps too low.

We're going to increase it to $23 million this year.

So all those changes in this table say, we thought we were going to end the year 2025 with $123 million.

With all these changes, it's going to actually be $141 million.

So $18 million more of balance at the end of 2025 will be used in 2026. So that's one-time money.

It's like finding a $20 bill in your coat.

It's great to have, but it's not going to pay your rent on an ongoing basis.

And Tom, just as you're continuing forward, I do appreciate the health check-in analysis.

I will amend your car analysis, though, to say we have a car, we are driving it, and it needs to be upgraded from time to time because if we We started in 1869. That kind of car would be really outdated by now.

We would need to turn it from a four on the floor clutch into an automatic and maybe today we would be upgrading to electric, right?

So we do have a vehicle that we are operating the city with and sometimes we need to make upgrades.

Well said.

Now I'm gonna dive into the, so we kind of finished the look at 2025 and then spend quite a bit more time on 2026. So this table here is kind of the starting point.

So kind of refreshing back to the discussion at the dais about the biennial process that we have.

So last year, council adopted a two-year budget, well, adopted a 2025 budget and endorsed a plan for 2026. In this process, our starting point is that 2026 plan that was endorsed last fall.

And that's what this table shows.

And again, so originally we thought we were gonna start with $123 million of fund balance, 1.9 billion or so of revenue, giving us resources of a little over $2 billion in the general fund, expenditures of $120 million, and then planning reserves, which, you know, this is kind of a unique concept.

It's part of the budget, but it's penciled in.

So it's not part of the appropriation request, but it represents items that we do intend to spend money on in the future.

They're just not precisely known well enough that they can be included in the appropriation.

So that's total uses of $2.081 billion, meaning that the end of 2020, 26 endorse budget, we had a zero balance, which is considered a balanced budget by state law.

So from that starting point, in the next few slides, I'm gonna cover how those numbers have changed in the proposed budget, including, you know, as I pointed out in the last slide, $18 million more of one-time cash is available.

Their August forecast give us, I believe, a little bit more money to allocate.

Their baseline technical changes.

Then I'm going to spend a bit more time on some of these new revenue proposals that have been considered during the year and more recently last week or this week.

And then factor in just mayor's net new spending proposals and then basically cover how all that ends up with a new higher balanced budget.

Not gonna spend a whole bit, a great deal bit of time on this chain, on this slide, but this is kind of the baseline technical adjustments.

So just basically updating things for inflation and central costs.

So the costs of internal services provided within the city decreased.

So that was actually favorable, decreased total spending by about $5 million in the general fund.

So the kind of penciled in planning estimate, like I kind of refer to it as a placeholder amount, better than a reserve.

Like a reserve to me is money we hold in a case of emergency.

The planning reserves are definitely money that we as a city do intend to spend in the future.

But those actually, those estimates went up by $2 million in the proposal.

The August forecast, so I was mistaken, the August forecast actually decreased revenue.

So that decreased revenue by $6.8 million.

We're going to get an update as soon as next week to that.

But it is worth noting when we think about that number that the growth is 2.2%, which is slightly lagging inflation.

So that's not exactly a great sign because that indicates loss of revenue base.

That unto itself creates a bit of a structural challenge for the city, because it means that base expenditures, at least in the general fund here, are growing faster than the revenues.

And as the economy has slowed, that's a dynamic that is unfamiliar to us, but our reality, at least for the time being.

Indeed.

So all those kind of technical changes, again, just cost of doing business type stuff, reduces that balance number by $4 million.

So we say, in the last slide, I said, oh, guess what?

The end of 2025 was about $18 million of couch cushion money.

Well, now that kind of goes down to $13.7 million.

But I'm going to point out that, and you'll see later, that that doesn't include the impact of the payroll expense tax.

The payroll expense tax, which was something that got a significant downgrade in the last forecast, is in a separate fund, not part of the general fund, but as we'll discuss, they're interrelated with how the city does business, particularly within the general fund.

So this number, which is frankly positive, doesn't include that impact.

And just real quick, Don, this is-we just described before the biennial process and the endorsed budget.

This is a key step in that, because what's described here is we've taken the endorsed budget and made some technical corrections to it, but it is very much the starting point.

But it can't be-we can't just look at last year's, because inflation has gone up, there's been some other- is to absolutely start with the endorsed budget as the baseline, we use that phrase, and then make changes as big.

Okay, if all we were gonna do is stick to the endorsed, what would it take to do that?

And that's sort of the first step of this.

Exactly.

So we're gonna move to kind of where we're gonna spend a bit more time.

So this step two, there was a lot of good activity during the year with regards to revenue proposals.

And this is the slide where I kind of build those in in a sequential manner.

I mean, that's the approach that I'm taking.

I'm taking them in sequence to which they were considered and adopted by council.

You could take a different approach to layer them in.

That's the approach I'm using.

So the proposed starting balance is now $140 million for 2026, so it reflects that kind of better-than-expected activity in 2025. Just real quick.

Again, the proposed starting balance for 26 wasn't zero.

We showed you that previously.

It was north of 120, if I recall the number.

So again, that wasn't a surprise.

The whole budget was based on the idea that we were going to carry a significant balance into 26 and spend it down.

As Thomas identified, it actually ended up being a little bit better as we started.

but as he's now gonna say, there were a number of offsets.

I'm sorry, I'm just trying to keep the big picture.

I appreciate it because that actually gives me a chance to kind of tell you something I wanted to tell you from the beginning about the most important way to kind of read this slide.

And there are two columns on the far right.

So there's the balancing impact and then there's the cumulative running balance.

And so you can see how these changes with each tax proposal has a balancing impact that's either positive or negative.

So the new revenue minus expenses is either a positive or negative or zero number.

And then what impact that has on that $140 million starting number.

So it's important so you can see how the balancing status of the general fund changes with each of these incremental proposals.

And so, you know, kind of catching up to the kind of the baseline numbers.

So we discussed in the prior slide that the new baseline balance was $13.7 million positive.

Miscellaneous operating revenue adjustments.

So these are kind of minor adjustments, take about $1.6 million out on an ongoing basis from that.

So, you know, a fairly light touch, still $12.1 million positive balance in the general fund.

And so this next line is reduce the payroll expense tax transfer to the general fund.

So in the endorsed budget, there was about $265 million transferring in from the Jumpstart Payroll Expense Tax Fund to the general fund for revenue backfill.

So that's to, you know, a transfer of those monies from one fund to the general fund to keep the general fund lights on.

We learned in August that there's less, the forecast is downgraded by about $78 million per year.

So that put the Jumpstart Fund in the hole.

So the Jumpstart Fund not only supports this transfer to the general fund, but it also supports programs directly funded from the payroll expense tax fund.

So this adjustment here in the proposed budget says jumpstart fund is kind of down, is in the red.

In order to keep those jumpstart programs going, we're gonna reduce the transfer to the general fund.

And so that's what's reflected here.

So as you can see, reducing that transfer in on an ongoing basis brings that cumulative balancing impact to $65 million.

So that kind of puts the general fund at least in this point in the batting order, out of balance.

Just to put a little bit of narrative to this and sort of highlight what's happened here.

We had an endorsed budget for 2026. All seemed relatively well.

The technical changes weren't that large.

But the revenue forecast, It had a small impact on the general fund, but it had a very big impact on the jumpstart fund.

So that the challenge that the executive then faced, so 2026, with the reduction in jumpstart revenues, 2026 was thrown out of balance.

So we had this endorsed budget, we had a plan, but we saw it actually in April, it got a little bit better in August, but by August still had a problem.

The problem was actually more focused on the jumpstart side, but they overlap, right, because there's such a large transfer.

So they realized, they're either going to have to significantly reduce the direct expenditures from the Jumpstart Fund for whatever set of city activities, or reduce that transfer.

And as you will see, because of various options on both fund swapping and new revenues, they reduced the transfers to protect the Jumpstart Fund, but then have a hole in the general fund.

As you can see here, it's a running total of more than $60 million.

And that was the challenge that the executive faced to rebalance the endorsed budget for 2026, and it was more focused on how to make up for the shortfall on the jumpstart side, but that's because of its impact on the general fund.

Sorry again, just trying to take a picture.

All good.

So that's the story with the jumpstart fund transfer and its impact on the balance.

But there are other things that happened.

One of those key things is the revised FEPP levy actually includes some shifts from general fund programs to that new levy, to the higher levy, which then helps the general fund.

As you can see here, so this is not exactly a tax revenue directly to the general fund, but it's a tax levy.

to the FEP levy fund, which then enables those programs to move over to that other fund.

The impact of that is a $27 million reduction in general fund spending, which then kind of makes the problem a little bit better to a $35 million or $36 million negative cumulative balance.

Next after that, you will recall, there's the B&O Business and Occupation Tax Restructure.

And so I have a more detailed slide on this that we'll cover after this slide.

But at a very high level, that tax brings in $81 million of new revenue.

$28.8 million of it is spent for specific things dealing with federal response items.

But then the remainder was made available by ordinance for backfilling general fund programs.

And so in the kind of perspective of this table, 28 of the $81 million of revenue, $28 million is used directly for things that are itemized.

leaving the $52 million to kind of deal with general fund backfill.

And after you layer that in, you're back in positive territory with regards to the general fund.

There's a $16 million of positive net general fund balance.

And then the final revenue item that came into play most recently is the public safety sales tax, which is estimated to generate about $39 million of revenue to the general fund.

As presented by the executive, there are about $23.7 million of directly new spending items that are programmed against that new tax revenue.

There's $15 million that is because there is the ability to supplant so we can use the money for things that are eligible within our existing budget.

$15 million of that is assigned to those existing programs in the care department.

but because it's not adding something new, it has a $15 million balancing impact.

So when you layer that in, that leaves $32 million of additional general fund balance that is then allocated to new spending in the budget.

And I will get to that in the next slide, or two slides from now.

Great.

Colleagues, any questions at this time?

I've got Council Member Rivera, Council Member Kettle,

Thank you, Chair.

Thank you, Tom.

Thank you, Director Noble and Cal and your team, Eden, for being here today and taking us through all these budget pieces as we then later will start to dig into the departments and their particular budgets.

Tom, on this slide, so we start off with the $140 million budget assumption that that's how we're going to start the 26 budget, but after all these adjustments, we're actually starting the 26 budget with $32 million.

Thank you for the question, Councilmember Rivera.

Yes, and.

So this is before other items are added to the budget.

So what I've done here is to show you, there are some very discreet revenue proposals that are included in the budget.

Some of them have spending attached to them.

Some of them do not.

So this is the saying, there is a new tax added.

A certain amount of that is directly assigned to some new program, and then there's some leftover.

The $32 million is the leftover piece.

And then that money, plus, as you'll see in a few slides, is added to cuts that are in the proposed budget to generate a net balance that's then spent on new programs.

So it's all ultimately spent.

This is just a kind of sequence in the order of the analysis to show after taxes where the general fund balance stands.

So this is not the full picture of the proposal yet?

Correct.

Yes.

But it's a good, I mean, I think it's a helpful way to look at the actions that have been taken and what we have.

And I do note that this ending revised balance is the same amount as the proposed sales tax.

So without the proposed sales tax, would we have been at a zero here?

Notwithstanding what you just said about, there's some other pieces actually not included in here that paint the bigger picture.

This is a narrow picture.

Well, so the easiest way to answer that question is to look at the balance prior to the new tax, which would have been $16.4 million.

And so there would have been $16.4 million to allocate to something new without the sales tax.

So the sales tax adds money to do additional new things and to generate additional net revenue.

to get to the full 32, but without it, it would have been, the starting point would have been $16.4 million.

And could you have, instead of add new things, allocated that 32 million toward the stabilization fund or some other of our reserves.

So yes, we could stop at this 32 after all of these taxes and then allocate that.

I mean, again, allocate that to whatever the choice is in the budget.

If you're asking the question of if before the sales tax, it would have been $16 million.

So I'm just differentiating between the two numbers.

But yeah, I mean, at this point, it's all a policy choice within the budget of how to allocate that money.

And my last question, if I may, Chair, is the $32 million, is that one-time or ongoing?

This is a combination of one-time money, so the kind of couch cushion money I talked about, of $14 million, and then all of these taxes are ongoing taxes.

Councilmember, I think just if I'm understanding your line of thinking correctly, that line that's showing the public safety sales tax, it was a policy choice to identify new expenditures there.

That entire $38.9 million could have supported other public safety in the base, and so then that would have had a larger balancing impact and would result in more general fund resources available.

And also go toward the projected deficit in 2027. If we made different policy, we can still do that actually because we're still in the budget process.

But if we made different policy choices, this money could go toward that impending deficit rather than new.

I'm reacting to the new spending that this is going toward.

Yeah, I mean, yes.

That's kind of what Cal said.

That's essentially correct.

We made the point, but just to emphasize, as a legal matter, there's no non-supplant clause, and the eligible uses for that tax would apply to a number of ongoing city services.

So you could have just used it for existing services and reduce the deficit accordingly.

Correct.

Correct.

Yeah.

Thank you.

Thank you.

Thank you, Councilmember Rivera.

Councilmember Kettle.

Thank you, Chair.

Two things.

One is there are some assumptions here which are going to get settled out in a few weeks.

But I just wanted to note, because you mentioned it, it came up a couple times, like with the FEP levy and so forth.

So there's some big swings going on here with the levy, with B&O, and now public safety.

and then traditionally public safety has been approximately 50% of the general fund.

But these swings, particularly when you throw it in combination with the parks district, the parks levy and the like that, so I don't think this is a structural budget reform, but structural budget impact, I think we need to move away colleagues from this idea that public safety, which is a broad term, is like 50% of the general fund.

I think that's kind of an assumption that people make.

But with these swings, if that number shows up to be higher than 50%, you shouldn't be surprised because of, like noted here with the FEP levy, you know, shifting monies out of the general fund into the, basically, to be covered by the levy.

Is that a fair statement to make?

The city has systematically been shifting expenditures that were traditionally general fund expenditures towards the levees.

Not all the levees.

Housing was never a general fund expenditure, nor was education.

But if you think about the library's levy, the transportation levy, the parks levy in particular, those were all things that previously were more dependent upon the general fund.

So as those elements shift off the general fund, what remains in the general fund, the mix there, there's every likelihood that it has changed.

So yes, the things that remain in the general fund include public safety, so it would make sense that they become an increasing share of what is left, if you will, as we identify other funding sources, voter-approved sources.

You can trace some of this back to Eimann, but we'll leave that for another day.

I understand, Director Noble.

And so if...

Mr. Mikesell, I'm sorry.

And of course, just to point out, we're just talking about the general fund here.

So in terms of the entire city budget, The public safety share of the $9 billion or so is much smaller.

So we're kind of focusing on this small general purpose area, but that's also something to consider as well.

I thank you.

I just want to, because I'm anticipating arguments being made, hey, you're above 50%, and I just wanted to get on the record that there's reasons for this, so that's not really a valid argument against what is public safety's general fund place, if you will.

Again, not structural budget reform, Chair, but structural budget impacts.

No, and if that's the question, if you were to include PET and there's an argument that we should really consider PET and general fund together, then I don't know what the percentage is, but it's probably, it's certainly smaller than it is in the GF as a total, as a whole, because the PET does not support public safety in particular, probably some elements there.

So how big is the denominator as well as the numerator to dive into math?

Director Noble, I think you're correct, and then it is, what is PET today versus PET of yesterday, too?

And that's another thing where the arguments are made as PET of yesterday is today, when in fact it's not.

and as we go through these nuts and bolts, black and white numbers pieces, we should be dealing with PET of today in addition to the point that I just made regarding the general fund.

So thank you, Chair Strauss.

Thank you, Council Member Kettle.

And again, using more of a conversational interpretation of Robert's rules during this section of the budget, so no problem there, calling on speakers.

Colleagues, are there any other questions at this time?

Seeing none at the moment, back to you, Tom.

Okay, so I'm just going to point out that after this step two, there's $32 million of net GF, which is important.

We'll get to that in a couple slides.

So I want to dive a bit deeper into the B&O tax piece.

And again, prior iterations, in the director's cut of this presentation, I had all these slides detailed out.

but we probably don't need to go into all of them.

But this one's important because it kind of shows something about how we build budgets and how this particular budget is built with regards to this significant new B&O tax revenue.

So this details out the kind of ongoing and one-time piece.

So ongoing means it just continues in this budget and the next year's budget and the next year's budget after that until it gets cut.

If it's one time, it says it's just next year.

And then when I talked about the baseline and technical changes, well, the baseline and technical change will take it out in the following year's budget.

I'm pointing that out because the B&O tax had $81 million and up to $31 million is for, or 30 million, not 31, is available for administrative costs and federal response.

And so the budget, the proposed budget includes of that amount, so $28.8 million for those types of purposes.

But what I want to point out in this table is that in the budget, $23.6 million of that federal response funding is one time in 2026. So again, it will not continue into 2027 unless it gets added back in.

I will point out, I mentioned the planning reserves.

So the planning reserves are kind of the penciled in portion of the budget, the placeholder of resources.

So there is an amount of a similar value in 2027 in the planning reserves.

but that is not the same as being part of the budget in a very specific way.

This means that if there are resources within the context of a $140 million deficit for 2027, maybe these programs could be funded or maybe something else could be cut so that they could be funded.

But that is not the same thing as saying they're in the budget and they might need to get cut in the future.

So it's just a stronger position to have something in the base budget versus in the planning reserves in 2027. And so that brings the first policy consideration that I would offer.

Given the way that these funding, these amounts are structured in the 2026 budget as one time, one option, to make them kind of a stronger position in the base budget would to be to submit a cost neutral, so it would be revenue neutral budget adjustment that would move them to ongoing status in the budget and then remove that amount from the kind of placeholder in the planning reserves.

In terms of the financial plan, it would have a zero impact.

It would be the exact same thing.

But in terms of budgeting, it is, again, meaning that they would have to be cut in order to not continue in the future versus being added in in a resource constrained environment.

Just to follow on that, when we say to be cut, if you will, means that there's going to be documentation that this funding has been shifted from one thing to another.

As a matter of practicality, we know how much attention and interest you have in this.

We would track that either way, but as a good practice, if the intent is that this money be ongoing, or rather in this case, I mean, the pitch from the executive on this is that they don't know how they want to use it, and we don't know collectively, you don't know collectively, how you want to use the federal backfill in 27, because things might change.

but if we label the mind going, then you will be very clear that in the documentation associated with the budget that this thing that we had been doing is stopping and that this other thing is being proposed as a new one.

And again, I don't think there's any risk that we would lose track of that, but just in terms of overall transparency and approach, I think there's a lot to be said for what Thomas has offered up here.

And it's not a funding change, it's just a note that like, hey, we're tracking this very carefully.

If it's going to shift, we want to know very specifically why and how, if you will.

And so that's the intent of this, is really just to make sure that that is well documented.

If we don't do this, we won't lose track, I promise.

But again, as a matter of kind of the way we do things, it makes sense.

Thank you.

Council President Nelson, I see you have a hand.

So just to boil it down to really simple terms, this sounds like what I was complaining about my first two years in office, but I was referring to the way that federal COVID relief dollars were used.

I mean, they were one-time funds and then we created programs that were ongoing and then there was conversation that we needed to have.

And that's what spurred in part the creation of the revenue, I can't remember what it was called, the committee that looked at additional tax resources to support ongoing funding decisions.

Regardless of what option is eventually chosen, and I do agree that A makes sense, council is often put in the position of having to cut funds that we've built expectation in the minds of the public that will be ongoing.

And so we have to think about the position that we will be in as, as the appropriators in the future simply.

And so it's not just a question of what column does it go in, we also have to think about what expectations we are producing with these decisions right now.

That's it.

Tom, do you have anything to share or was that more of just a statement?

Yeah, I mean, I think I hear that it's a recognition of that.

It's either place on the financial kind of ledger.

It's still important.

It is a commitment either way within the fact that we, as you'll see, are projecting a general fund deficit in the future.

And so, but it could be similar things could be said about any kind of line in the budget in a way in terms of that it's money that the financial plan that we have received from the executive says that we cannot afford in two years.

Thank you.

Councilmember Rivera, Council President Nelson, do you have additional?

Yeah, just one last question.

You know, the Trump proofing part of the B&O, the segment that is designed to hedge against federal cuts, I have mentioned in a previous committee meeting, I believe it was public safety, but I can't remember which one.

When we get news that a big number is going to be cut at a national level, and I made the point that we need to have that broken down to what will be the impact in Seattle and how many people will be impacted.

And yet, so do we have any finer gradation of understanding of the local impacts to anticipated federal cuts?

Has anybody run those numbers?

And I see Director Noble and Mike Sell looking at each other.

I might say we add that to Q&A.

It's still so speculative that it is hard to run those numbers.

And the form that these cuts take are as yet unknown.

Just to give an example, it could be that dollars will be offered but under conditions that are inconsistent with the overall policy perspective of the city.

In fact, that seems to be the goal at some level of some of the federal actions.

But whether there are creative ways that federal dollars could be used by us, even facing those restrictions, unknown.

The Budget Office did at one point, I don't have the numbers in front of me, add up, if you will, how much federal dollars were flowing into the city, interestingly or not interestingly.

The largest absolute terms are in SDOT for capital funding for projects, but there is considerable money in the human services area as well.

So at a very high level, that analysis is done, but in terms of the specific risks that are faced in the near term, I think it still remains somewhat speculative.

But that's not to say that we shouldn't be focused on it.

Thank you.

Thanks.

Councilmember Warriors, I saw you had a hand.

It's no longer with us.

The question is answered.

No, kind of.

Thank you.

I was actually want to thank Council President Nelson.

She actually kind of put it in more context the question I was going to ask.

I might have a little bit finer point on that.

Asking our guests on the federal backfill on the ongoing because the commitments that we made when we know that we still have three years under this administration and maybe Ben answered it by saying it's speculative.

And if we're going to be having this same conversation next year about backfields because we've had this administration that has taken away federal money for some of our key social services safety nets.

And so I think you answered my question.

I'm not using a plane or baseball analogy, so maybe quite getting it out there.

It seems my best analogy there is we're going into extra innings and we don't know where the funding is gonna come from.

Well done, okay, nice.

Hopefully not 15.

Yeah, at the risk of belaboring the point, I do think it's that the issue is a bit of, Maybe people understand the risk that's going to be there in 2027, but the proposal isn't specifying where that spending is going to be in 2027 yet.

But that all has an impact on our budgeting deficit for 2027 as well.

So I think all those things are kind of coming together and it's showing how much uncertainty there is in where we're going.

Just to emphasize that, note that, and I should have made this point earlier, Even in the allocations and appropriations shown here, there's a recognition of that uncertainty.

So there's almost 9.5 million set aside for shelter, but exactly where that money will go is TBD, because again, we don't know exactly what constraints we're facing.

So bottom line is we're going to have to be reactive to what comes our way, if you will.

Thank you and Council Member Rivera, I see you've got your hand up.

I will say just in the last week, I've heard of even more potential cuts that could affect us here locally that are real and just not known if they will happen quite yet.

So with that, Council Member Rivera.

Thank you and my question is actually another, another piece to this, which is just in terms of the policy consideration, we have this federal funding backfill reserve.

So if we make these things ongoing, then if we identify a future federal backfill need, we're back to the position where we don't have money to draw from.

Whereas if we leave it as one time, if we feel next year that these one-time things this year need continued funding, we can make a determination then, but then we will still have you know, we will be able to see at that point where we are and we can better allocate perhaps the funding later.

I think you raise an interesting point and I want to be careful about this as we describe this.

You know, the advantage of label them one time, excuse me, label them ongoing as we described is that there'll be a lot of documentation if they're shifting.

At the same time, labeling them ongoing might be, is misinterpreted as the city promising that this is exactly how we will allocate this money forward.

That is not the intent, and we would want to be very careful about that, and any budget action that we suggested relabeling these, I think we would make that very clear.

It's not that we are, per se, committing to allocating this federal backfill per this formula, if you will, but rather that we are dedicating this much money to federal backfill and we intend to track exactly how it changes.

So I think that would be an important message as part of any budget action that would pursue that way.

And it's also an argument for not labeling them ongoing because we don't actually know whether they will be.

Our interest was making sure that they're tracked and that any changes are processed.

wouldn't want that to be interpreted as a commitment that we are necessarily going to fund this way.

That is a risk of a misinterpretation, if you will.

So I think we want to be careful about how we did that and or not do it in the way that you may be suggesting.

Thank you, Director and Chair, if I may.

Just the piece about it ongoing, we have done that in the past where we've labeled things ongoing and then we're stuck in a position of then it is interpreted Whether or not we intended it today, it is interpreted as an ongoing commitment.

And then if we need to find funding for something else, it becomes an ad.

that then increases the deficit versus, hey, let's leave ourselves some flexibility because we don't know what the need will be.

And it doesn't mean we won't continue to fund some of this if it does need funding, but we will be in a position to say how much if we need to add something else that we need to fund.

And I will also, toward that regard, we could leave as one time and then we can have, I don't know, a resolution that indicates what things we would like to spend money on that we think are coming down the pike as a way to preserve intent on council's part and prioritize.

Since we don't make the initial proposal, the executive does, we're able to do that as well, no?

Thank you for that.

We might consider some potential modifications to the options here.

Thank you.

Thank you, Chair.

Thank you.

Council Member Rink.

Thank you, Chair.

Colleagues, I wanted to take a moment just as Chair of the Select Committee on Federal Administration and Policy Changes just to speak to my understanding of how we're tracking some of these federal cuts and some of the uncertainty that I think we're all trying to grapple with when it comes to these federal policy changes.

And hearing the Council President's question just about understanding direct impact to City of Seattle residents, I think it's I think it's important to note that when we look at some of the federal policy changes, particularly to Medicaid and changes in SNAP eligibility enrollment, to my understanding, City of Seattle hasn't historically tracked directly how many of our residents are accessing those benefits.

So not having that at the ready, I know there's been some state-level analysis, understanding how those federal policy changes, again, impact our statewide enrollment.

Further analysis is needed to understand city level, but to my understanding, City of Seattle hasn't tracked how many of our residents are enrolled in SNAP, and I invite central staff to correct me on to that point.

but that has been something we've had to look to some of our state partners to understand a statewide impact and make some informed estimates on how we can be adjusting here locally to meet the need.

But I wanted to illustrate one example of some uncertainty on the federal funding front that I think is impacting as at least my office is thinking about the B&O tax and how we backfill.

And it's related to the continuum of care funding that is allocated from HUD.

This is $67 million that directly benefits our region between Seattle and King County.

HUD has not released the NOFO yet.

This is actually the latest they've declined to put out the NOFO.

It has never historically been this late.

Our local experts are trying to figure out what even the policy priorities will be in it, but historically our region has used two-thirds of that $67 million to fund our permanent supportive housing.

and we're hearing whispers that there will be a change in priorities where we might not be able to use that level of funding to support permanent supportive housing.

And so understanding that there's a moving target in terms of what are gonna be the policy priorities reflected in that NOFO, how much is going to be in it and what's gonna be the turnaround time.

These are all outstanding questions that certainly make it challenging for us to plan as a system when we're talking about how we fund just our homelessness response services.

And so this is just one example that I wanted to uplift for today's discussion when we're talking about grappling with uncertainty with some of these policy changes.

And so thank you for allowing me the time to expand on that, Chair.

Thank you.

Thank you, Council Member Rink.

Colleagues, any further questions or comments on this slide?

With that, we'll move forward.

Thank you, Chair.

So now I'm going to catch back up to the final and third step on the review of the proposed budget adjustments.

So if you'll recall, after the tax proposals, there was a $32 million of net general fund.

available to allocate in the 26 proposed budget.

So the mayor also in the budget proposed $41 million of various changes to the budget.

So those are various reductions to the budget.

So that gives a total of, gosh, $73 million to add to new spending.

So you can kind of see the breakdown in the table, $41 million of expenditure increases, $73 million of expenditure increases for a net of $32 million, and then that net $32 million takes up the excess balance that was made available from the new taxes.

So again, there's a great amount of detail behind all of these individual cuts and increases that'll be covered in my colleagues' budget considerations papers.

There's a full table that's included as an attachment to the memo, but that kind of gives you a sense of kind of the order of magnitude of how the new revenue was allocated.

The net kind of over and above specifically allocated new revenue was used, plus cuts were used to add new spending in the budget.

Yeah, and then that's essentially the kind of final step that uses up all of the resources that was made available and results in a balanced budget.

And so kind of we're going to go back to the checkup, kind of the physical exam.

So now we're going to look and see, with these proposed changes to 25 and 26, how's the health of the general fund?

And as you can see, kind of the cholesterol number has gotten worse.

So it was $89 million last fall in terms of more spending than available revenue.

And now it's grown on average to $125 million on average.

It's actually a higher amount.

It's $140 million in 2027. and so that's not a great place to be, frankly.

And I'll kind of loop back on that, but there are a few things kind of specifically to consider about these projections.

One, and I'm gonna cover this in more detail, and I've kind of touched on it previously, but for the first time since I've been looking at these plans, the executive is now including a $10 million underspend in 27 and beyond.

So kind of saying, we're making projections for those years about how much we're going to spend, and we think we're going to spend $10 million less in each one of those years.

Again, that's a novel approach, and I'll go into a bit more detail in the next few slides on that.

But then also, within the planning reserve, so those are the placeholders in the financial plan for predicted and known kind of commitments that haven't quite made it into budget yet.

There's actually, and this seems to be a departure, there's amounts included for proposals like so current year proposals that are not part of current law.

Specifically, there's money that's added in there in the projection to build out additional 150 shelter beds in 2027 and operate them.

So that's not exactly kind of a current budget, current law forecast.

That's sort of an estimate of what it'll cost to do things that the executive is kind of committing to informally right now.

And so that's just something to consider when thinking about these numbers, those two factors, particularly the second factor with regards to whether or not this number represents the actual proposal before you today.

But I am gonna go into more detail on the underspend specifically because as you can see, so what I've got here is the chart that shows when we started using underspends in the budget.

So we started using them during the COVID pandemic.

So basically, again, this is like saying our food budget is $100 a month, but we're only going to spend 90 of it, and we're just going to make a commitment to that.

And in general, it's kind of also a way of saying we have good financial stewardship.

The departments are gonna spend less every year.

We know that to be the case.

And so we're just gonna kind of count on that.

And as you can see, the variance, so the assumption versus how much actually the underspend was, it's been conservative.

So we've generally ended up with anywhere from 20 to $40 million over and above that underspend assumption.

But again, it's a new thing.

There's not a specific policy on it.

It's just an adjustment that's made in the financial plan.

But the financial plans starting in 2027 and beyond are starting to include that assumption as well.

And I'm going to kind of wrap up with the assessment of the financial plan, but this might be a kind of a warning sign of that we're trying every last little bit of, you know, we've used the toolkit and now we're looking at the that junk drawer and we've got a bunch of twist ties and expired coupons in there.

There's not really a solid policy governing that.

You'll see in the next slide that perhaps there might be some space in the area of budget reform to think about this more deliberately.

That is actually the next policy consideration is that we're now including underspends in the budget, we're including underspends in financial projections.

but council does adopt the budget every year.

Council does not actually adopt anything with regards to the underspend.

That is just an assumption that's being made.

An option would be to form up some form of a study committee between central staff and city finance and city budget office, kind of review the practice, check best practices and kind of affirm that this is the right way to do budgeting or perhaps take some other action.

of course the other option is to just continue to study as she goes and to go forward with the assumption that's being made.

And with that we have a number of hands.

We have Council President Nelson followed by Kettle then Rivera.

What you're identifying, can you go back to that previous slide?

Note colleagues that there is more than half of the assumption is doubled in the actualities.

I mean, basically what I'm pointing out is that this slide represents what motivated me to submit my slide last year, which was look at the historical underspends and then explain them.

you know when you get the budget director and the office of housing director at the table then everything kind of makes sense you know it but I do appreciate that colleagues did ask questions which was can we be doing better folks we are the appropriators that is the job of the legislative body so when we see this variance here we have to ask what that what spending decisions that we made are not being fulfilled.

Like, what are they not spending money on that we said that they should spend money on?

And, you know, we complain about what's happening in DC, but it's happening right here.

Sorry to make that comparison, but this is serious.

And I do think that we should develop policies and then I don't know, reassert our role as the, you know, as the legislative body, as the people that make the budget.

And then we expect to see our budget decisions fulfilled.

I'll simply, I'll stop there, to put it plainly.

Thank you.

Councilmember Kettle.

Thank you, Chair.

Mr. Mikesell, on this, you know, in a sense, because we have emergency stabilization funds, which I support, and we do need to refill because, you know, the Great Recession, the pandemic, we need to be ready for whatever the next thing is.

Would you characterize this point as being kind of like an annual, essentially, reserve fund?

As opposed to, like, waiting for the next big thing, like a pandemic, Great Recession, and so forth?

Thank you, Council Member Kettle.

That's a great question because we're kind of already counting on it.

So it's sort of the inverse theory of having, you know, so the emergency fund and the revenue stabilization fund, which we'll cover in a bit, are just amounts of cash that are available for their specific purposes.

In this case, we're kind of already counting on spending less money than we budgeted.

When revenues dip, all of a sudden it becomes less of a we're going to depend on vacancy savings or we're going to maybe save a little bit of money on a contract.

It becomes a firm decision.

It's like now that underspend has to be materialized in a more immediate sense into something real.

So it's less relying on the good financial stewardship and the natural course of business and becomes more immediate.

So we're kind of pulling it.

We're pulling that forward a little bit right now, particularly with regard to the financial plan, that assumption of that that kind of the seas are always gonna be calm and it's gonna be steady as she goes.

Because once it gets choppy, we now have to kind of fill that gap quick.

So that's kind of how I would characterize it.

It's almost an inverse of a reserve fund.

We're kind of paying ourselves forward for things to go well.

And again, it's...

It's not exactly a bad practice because we are recognizing the fact that there is excess.

So we're not letting funds sit idle and having the opportunity cost of that.

but then it also is a bit more risky because we're counting on that to be the case going forward.

Again, it's a choice.

And I didn't put it on the underspend kind of options, but it also is an option to, and this is to Council President's point, is to actually make them more firm.

I mean, the underspend assumption, I mean, it's a difficult choice, but it could be made a more affirmative reduction to the budget because that's, in essence, what it represents in the financial plan is we're gonna appropriate $1.9 million and we're gonna spend $1.890 million at the end of the day.

Where that is, it's kind of up to the natural course of business or it could be made more specific.

Some further narrative on this.

The out-year planning that's in the financial plan It's intended as information to inform your current decisions.

How does what I do today affect what I'm looking at out years?

That's an inherently speculative exercise.

We make some assumption about the growth of both revenues and expenditures.

But to the extent that you're minimizing the potential expenditures in future years, the message you're sending yourself, if you will, is that you can afford more ongoing expenditures now.

By making this $10 million assumption that makes what otherwise would be a $10 million deficit in the out years go away, it makes you feel better about ongoing commitments you are making today.

And again, for the reasons we described, there's reason to think you could meet those commitments, but you're fundamentally reducing your future flexibility, right?

Because you're making an ongoing commitment that in the future years is gonna be a cost pressure.

Interestingly, we're acknowledging that we're going to underspend relative to our adopted, but we're not acknowledging that there potentially be expenditures that we don't anticipate.

We have a reserve for those, we have a reserve for revenue shortfalls, but to my mind, it's a little bit one-sided to focus on the expenditure side and assume that we can keep this under control without acknowledging other risks.

But in any case, just as long as you're clear about what this is, Clearly, on an ongoing basis, we tend to underspend by more than that.

This is not creating a huge problem.

It's just a question of what level of margin do we want to be planning?

At the end of the day, it comes down to how much comfortable committing now in terms of the implications it has for the future.

It's like when you sign up for your own mortgage.

You're tying yourself to that payment in the future, and you have to decide whether you're comfortable with that number.

You expect your income to grow, but there's a risk in all of that.

Thank you, Mr. Mikesell, Director Noble.

Again, in context, I could imagine past years, decades, when we were in a recession, that this practice may have been used, anticipating, like, you know, are we out of the recession?

But we should reflect on the fact that we're not in a recession.

and so now I'm thinking, I know a public commenter made the point regarding the revenue working group and as I think I mentioned last year, there was no companion spending working group when that was done and here we are not in a recession and I understand it's prudent like Mr. Mikesell said, I understand those points but it's also if you go back bigger picture we're not in recession.

I could see this happening in those kind of periods, but here we are doing it and it's a problem.

Going back to the chair's comment, we're still driving that car, but thank God that gas tank has a little bit of a reserve in it, but otherwise we'd be in trouble.

Couldn't make it to the station before then.

I just wanted to highlight that and also highlight, it's probably good to highlight the fact that we're not in a recession, but yet here we are.

and this kind of highlights what probably historically has been tied to recessions.

And one could argue we can have a federally induced recession tomorrow.

But still, it's an intriguing and interesting point to reflect upon and say, hey, where are we right now?

And more importantly, where are we going to be in 27?

So thank you, Chair.

Thank you, Council Member Kettle.

Council Member Rivera?

Thank you, Chair.

I appreciate your analysis, Tom, and I appreciate your waving the warning sign here.

It seems like the 10 million underspend is not in line with the actuals as per council member or council presidents Nelson's comments.

We've actually had more than 10 million underspend every year.

and this is a one-time, it's like a one-time every year, this assumption of 10 million underspend and it's not reserves because we're not proposing or the executive's not proposing to put it into a reserve, into one of the, either the Revenue Stabilization Fund or the Emergency Revenue Fund.

It is intended to be this underspend assumption so we start the year with something.

I think my huge concern here is to my recollection, this is the first budget year where I feel like council hasn't had flexibility in the budget for its priorities.

Usually there's something of some flexibility in the budget for us to be able to tap into for priorities for our respective constituents and across the districts.

So I do think, and thank you for flagging the piece about in the policy consideration perhaps we should do a SLI, a statement of legislative intent to convene a group to talk about what that could go towards so as not to miss an opportunity for council to weigh in to what that underspend should go to.

So I think that is important.

I think the bigger picture thing here is that you know that the understand spend assumption is relied as you say here in the budget and yet a higher deficit is being projected than what we're actually saying the understand so it is a problem it is a structural problem moving forward because every year we've had more of them more expenditures and revenue and we have to keep and adding something in order to stay balanced instead of actually looking at the budget and making cuts accordingly.

Because I don't even know where we're gonna go from here in terms of adding revenue.

And equally important is by the time the budget gets to this body, it makes it really hard for us to include our constituents' priorities into the budget.

So both a comment and also just underscoring, thank you for what you are identifying here, because this is a huge point to council president's comments earlier.

What you are identifying for us here is really huge.

and we really need to take this under advisement and determine what our response will be to this that you have underscored for us.

So thank you, thank you, Chair.

Thank you, Council Member Rivera.

Council Member Nelson, is that a new hand?

Yes.

Okay, Council Member Nelson.

So I'll give you a real life example of why this is so important.

This isn't just 10 million or 46 million sitting in a column that didn't get spent.

We allocated, this is a budget amendment that I put forward last year, $400,000 to Evergreen Treatment Services for an additional mobile medication van to serve people in the streets who are suffering from opioid use disorder.

They have not received their check yet.

I've been asking for months, why have they not received their check?

Note to Jen LeBrecht and Director Kim, I'm going to be asking this when HSD's budget discussion comes up.

Yes, Steve Woolworth out there, Director of ETS, I am always following up on this.

that is just one example of things that aren't getting done in the budget.

And so it's not just that the executive thought that things would be more expensive and then it ended up not being as expensive and so that the reason that we have underspend.

No, our decisions are not being effectuated and that is a problem.

And so instead of just a slide to get a group together to make recommendations, we could impose provisos that require that our specific appropriations are realized in the budget.

There could be something that requires that the legislative body's decisions are actually, like I said, effectuated.

And then I do have a question, which is, what do normal cities do?

Is the underspend that we see, the trends in underspending in Seattle, is that basically, is that within the course of normal operations of cities of our size?

You know, let's just narrow it to the West Coast, perhaps.

I'd be interested in understanding some perspective along those lines.

Council President, thank you for the question.

So I don't know off the top of my head the kind of benchmarking, I guess, analysis to compare to other cities.

But with regard to the practice of relying on it in a budget, in my personal experience is that it's not generally something that's done in that way.

So there's kind of two questions that could be asked.

One is how does the actual spending compare to other cities, to our peers, if you will.

And then is this practice commonly used?

And I'll just kind of back up to Council Member Kettle's observation about this seems like something that you do in a recession.

That's kind of what I tried to show in the table is that we started doing this during the COVID recession and it has can now persist it as an ongoing practice.

So just wanted to make that point.

But yes, I don't know off the top of my head the comparisons to what this variance is compared to other cities, but we can look into that.

I think it would be disingenuous if I didn't own some of my own personal, professional history on this point.

I, in fact, as Budget Director early on, in the context of facing layoffs, proposed a budget, admittedly, I think in an unusual way that included an underspend assumption.

And it was per Councilmember Kettle's description exactly the scenario of, I don't know whether you're technically in a recession or not, but the city was facing a situation of layoffs, and the concern was, I knew, this is a deeply personal description of this, and I didn't intend to do this, but I'm going to.

as budget director, facing the responsibility of recommending layoffs, but knowing that we were likely to end the year with sufficient resources to avoid those layoffs.

Ongoing city employment is not your responsibility.

your responsibility is to the citizens of the city, just to be the residents of the city, just to be clear.

But at the same time, it's obviously a lot of disruption.

And I was worried about the disruption in service.

So if you laid folks off, that meant there was less city service to be provided.

And in that context, I, again, couldn't balance, We're going to have to make recommendations for reductions if we were to balance to zero, if you will, by implementing an underspend assumption, which was able to, I think the number was 10 million, effectively avoid that.

It was not well received here at the time, just to be clear.

In fact, the budget was restructured to avoid that assumption.

But it was made in that narrow context.

We are facing a different set of situations here and challenges, more on the expenditure side, if you will, than in terms of on the revenue side, but nonetheless, I think it makes sense in some circumstances, not necessarily in all.

I think it also makes a difference to be thinking about it in the short run versus kind of the long-term planning.

Long-term planning has lots of uncertainty in it, both on the upside and the downside.

And if you're only taking sort of the upside side of the underspend part of that in your long-term planning, this is the point I was making earlier, I think you're sort of fooling yourself.

In the near term, facing difficult decisions, if you're, you know, confident that you can achieve the underspend, then maybe it's not unreasonable on a sort of one-year basis as you look ahead.

But again, needs to be used prudently at a minimum.

And if I may just- Yeah, and can I just add, you're absolutely right, it needs to be used prudently because we've got, because we, the public is wondering what's going on.

I mean, we have to err on the side of transparency here, and this can seem like a shell game.

if within the context of also establishing two new revenue sources or increasing the revenue sources.

And so we owe it to the public to actually reflect how much money we have and how much money we're spending and not underspend simply to be able to then maybe be able to afford something in the future.

And anyway, It's our duty to make sure that we are reflecting reality in our budgets is what I will say.

Thank you, Kelvin.

I just want to also bring us, you know, this is part of the budget sustainability message that we're putting forward here.

This underspend is showing up in the financial plan and it's how we get to a balanced budget, it's part of how we get to a balanced budget in 2026. and we are facing ongoing deficits in and out years.

So it is worth the attention and it's worth thinking about how this body deals with it, but it's also just a small part of the overall deficit issue that we're facing going forward.

Thank you.

And Council Member Rivera, I see you've got a new hand.

We've got eight slides left in 24 minutes.

We've sat on this slide for maybe 10 to 15 minutes or so.

Do you need something on the record?

Okay, I'm gonna pass it to you, but we have to return to the slide deck and keep moving, please.

Thank you chair and I think it's because this is such an important point.

I will say on the 10 million underspend it relies on, it is not an intentional thing that we're doing.

We know that every year we have underspend by a certain amount so we are relying that that will continue on its own.

It's very different from saying we are intentionally going to underspend by 10 million every year so we can count on that.

Those are two different things.

And so we need to think about if we are going to rely on 10 million underspend, then we should be intentional about it versus like we know it has happened, so we're going to just rely on it naturally happening.

Thank you, Chair.

Thank you.

Back to you, Tom.

Thank you, Chair.

So I'm going to wrap up now the kind of the final diagnosis for the general fund.

So kind of think about the physical exam for the general fund.

We've done a lot of good things to kind of help the health.

So there's a lot of things that have been done over the last few years to kind of keep the general fund in balance, including expanding the transfer from the Jumpstart Payroll Expense Tax Fund So as we explained earlier, budget shifts from the general fund to the expanded FEP levy, a new B&O tax restructure that provides $81 million in 26 of ongoing revenue.

New public safety sales tax generates $39 million ongoing revenue.

And then now, as we've kind of discussed in some detail, we're projecting using underspends in the current budget and now future projections.

And so we've employed a lot of these tools in this budget, yet the deficit projection is getting big, so it's getting larger.

So that's like getting, you know, we had that high cholesterol diagnosis from last fall.

And so now we're taking a stat and we're exercising more, but then we're also eating ribeye steak in every single meal.

And so it's like, you know, the health is projected to get worse.

And everything's a projection, revenues, expenditures, and the like.

However, we've used a lot of the tools.

There aren't a whole lot of tools left if uncertainty rears its head in the future.

I like ribeye.

Okay, so we can now turn to our fiscal reserves having kind of talked about the projected deficit, how it's grown to $140 million next in 2027. So we have two fiscal reserves.

We have an emergency fund, which is fully funded by policy.

The policy is basically a $2016 value inflated each year by inflation.

It's $87.7 million held in a separate fund available for unexpected emergencies, and it was used heavily during the COVID pandemic, and policy decisions have built it back up to its full balance.

The other general purpose reserve that we have is the Revenue Stabilization Fund, that is by policy funded to a balance equal to 5% of general fund taxes.

In any year where that cap is not met, the budget shall include a half a percent, a deposit equal to half a percent of general fund taxes forecast for the year.

So using those kind of parameters, the deposit for 2026 would be 7.7 million dollars per year and the table here shown below kind of compares the the standard in the municipal code with the standard that's in the proposed budget.

So as you'll see they've kind of revised balance you know at the end of 20 the projected ending balance for this year 2025 is 68.2 million dollars.

Reading SMC would indicate that the transfer would be 7.7 million dollars However, the budget includes a transfer of $3.1 million, which is $4.7 million less than what code would indicate.

And the rationale or the reason behind that is that it seems that the proposed budget based the transfer off of the revenues excluding the new taxes.

So as you will recall, there are $120 million of new tax revenues included in the budget.

and by reading the revenue stabilization fund policy would indicate that we're not at the level of transfer that would be indicated given those new revenues.

Tom, just before you move on, I will summarize the conversations that I've had with both central staff and the CBO to understand how or why this happened.

I think that a conservative reading of the SMC would state that you don't necessarily need to add this in.

Common reading of the SMC says you would.

Either way, I think it's splitting hairs all to say, I would like to have this funding, this 4.7 million added to the emergency fund.

Colleagues, I don't know that I'll necessarily bring an amendment for that.

and our ability to do so to refill these reserves will be based on all of the context that we are receiving over the next week from the revenue forecast to all of your proposals, et cetera, et cetera.

But I just wanted to put that on the record that I don't, there is no maliciousness here and we have an opportunity to make some fixes.

Thank you.

So there is a consideration, so we kind of have summed it up, but the options on the table would be to actually make adjustments in the budget, to fund it to the higher level, given all the uncertainty.

Okay, so I'm gonna get into the territory of underspends.

One could also pencil in a higher underspend assumption.

We've seen history has indicated that the underspend is higher than $10 million, and that's what's in the endorsed budget right now.

Proposed legislation to perhaps clarify if there's any differences in interpretation, clarify what the understanding is, and then of course no change.

Thank you and Tom I should have waited until now to jump in just to say we will be taking one of options A, B or C and if I had a magic wand and all the money in the world I would choose option A and those are the decisions that we'll come to over the next few weeks.

OK, we are rounding third base.

So now I'm going to wrap up with a kind of discussion of the Jump Start Fund, which Last year, you will recall, there was a policy change with regards to the Jump Start Fund that gave it greater flexibility around the use of the funds while retaining the guidance in the original fund policy.

Also, one of the provisions that was included in that ordinance was to kind of clarify the interrelated nature between the general fund and the Jump Start Fund, how the Jump Start Fund has built itself to be, you know, the revenue has been to a level where it can help with general fund backfill, but also understanding that in cases where there are pressures on the Jump Start Fund, the general fund could return the favor.

and in fact, as I mentioned earlier in the August forecast, the biggest downgrade was to the payroll expense taxes, which go to the Jumpstart Fund each year, about a $78 million hit.

And as we discussed, one of the kind of revenue proposals was to reduce the amount of money flowing from the Jumpstart Fund to the general fund in 2026 proposed budget.

But I will say that that largely removed the need to make any large reductions to the Jump Start Fund.

So the programs that were proposed to be funded by the Jump Start Fund are kind of largely retained at those prior levels because of that shift with the general fund kind of picking up the balance of the impact of the forecast adjustment.

So that's good news in that regard.

One thing I will point out, again, with regards to reserves, with regards to how much money gets set aside into the future to deal with risks, and then how that money is set aside, I'll say that there was a proposal last year to fund a jumpstart.

What is it?

The Payroll Expense Tax Revenue Stabilization Account.

that's funded in a four-year period to reach 10% of payroll expense tax revenues in the general fund.

So the proposed budget does include, well, the proposed financial plan for the Jumpstart Fund includes $9.7 million.

And so this is kind of a, not a budgeted amount, but a penciled-in amount indicating good progress towards funding that reserve.

However, again, getting into how you read the ordinance, one could read it to say that the add amount should actually be part of the budget.

Again, a policy consideration in that regard would be to make the funding level of that reserve more concrete in the budget and shift it from a kind of line in the financial plan into an appropriation in finance general.

It would have the exact same fiscal impact, but it's kind of like the difference between saying, You know, I'm saving $5 that's in my pocket versus putting $5 in the bank.

Putting it in the finance general would be closer to putting it in the bank.

Yeah, just to emphasize that point, this is really a technical piece, but I think potentially an important one.

So the proposed budget, the mayor has...

of the PET revenues, they've appropriated not all of them.

They've left $9.7 million unappropriated, so it won't be spent, but nor will it be shifted to a specific place where it lives, if you will.

And that's more of a technical thing, but again, in terms of transparency and the accountability about it, I think there is some value in doing it that way.

That is precisely how we do it with the general fund.

So there's this revenue stabilization account that is an account within the systems that is tracked differently.

Again, not a critical distinction, but just sort of essentially a good practice.

Thank you.

And just as a reminder from last year where we were, the executive put in quite a bit of funding into the Jumpstart Reserve account.

We as council used that funding as a way to balance a lot of the different priorities that we were bringing forward.

and at the end of the day we added policies that Director Noble mentioned which set forth the algorithm for the revenue stabilization account to be repaid.

From there, they have done this, and we've got these couple options on the table right now.

At the end, in the chair's package last year, we did leave some funding in the revenue, in the Jumpstart stabilization account, and ultimately we, as a body, decided to use that funding for rental assistance.

So just as a look back to last year, where were we with this account?

So thank you, Tom, over to you.

Thank you, Chair.

So I think we've covered the consideration here, and I believe that is the end of my presentation.

So I'm happy to answer any additional questions.

Very thorough.

I mean, really, Tom, this is impressive analysis.

It's a dense book.

It covers the span of many years, as you mentioned, with your analogies of cars, planes, trains, and baseball.

So just really appreciate all of your hard work and for putting it in common language terms for the viewing public and for us.

With that, colleagues, Councilmember Juarez.

No, no, no.

I'm sorry.

I was just saying, yeah, I appreciate the analogies.

Stole my line, Mr. Chair.

I stole apologies for that.

I have a joke, but it's probably not correct on the dais today.

Colleagues, are there any questions, comments?

Councilmember Rivera, I see you.

Thank you, Chair.

This is just a comment.

One, a note of appreciation to Tom, who's done such a great job of putting together a memo for us that really is very transparent, it's very informative, and I for one appreciate it as I'm looking at this budget.

And also, these are realities.

We keep kicking the can down the road, and we have run out of We cannot find a gas station for miles.

That's my best attempt at an analogy.

And so we really do need to, this is an opportunity and Tom, I'm hearing you sounding the alarms very clearly that we really do need to look at how we are going to be managing for a budget deficit that we cannot get away.

We're trying to chase our way or run our way from away from it.

but we're not gonna be able to, it's catching up to us and this is our wake up call.

I thought it was a wake up call last year and this really is a wake up call.

We now have passed two taxes, two new taxes to try to avoid what I think we need to be doing is taking a good hard look at the budget and I'm gonna, I am here to work with you all to do that.

but we can no longer sustain what we have going here and I am disappointed I will say that this budget for us to include our priorities we will now have to look at repurposing funding and that is not a great place to be at but it is the truth and I do think that we need to make some hard choices here, moving forward, starting with this budget cycle.

So thank you again, Tom.

I really appreciate the information.

We have the information by which to make decisions.

We just need to make the hard work of actually taking those, making those decisions and taking and doing the hard work.

It's not easy, but it is necessary.

So thank you.

Thank you.

Colleagues, any other questions, comments?

Council President Nelson.

That's especially important.

I second Councilmember Rivera's comments because the cash cow of our budget is the jumpstart fund and it is in, you know, we see what's happening in the tech sector.

And so we cannot just depend on that.

I'm correct.

I need a refresher of what happened last year because I remember we received a budget that I believe it had 49 million in allocated jumpstart funds.

And then the chair's package spent a certain amount of it, but added 15 million to the 2027 deficit.

And then it came down to the nub, and then we spent the very last bit on rental assistance.

Is that a rundown?

Is that a pretty accurate statement?

Because we're not facing the same conditions anymore.

We will not have that cushion going forward.

We could have continued reductions as we saw in April, or I mean before April.

So yes, Council President, just in general terms, the budget as proposed did have, I think it was on the order of $40 million of of reserved funds in the payroll expense tax fund, which were then allocated to other priorities in the budget.

And at that time, that's when the policy shifted from a funded immediately to funded over four years cadence.

So right now, the policy for the Jump Start Emergency Stabilization Reserve, I can't remember the exact words, but for that reserve is to get to reach a 10% level over four years.

So that is generally, I mean, I don't know the precise dollar amounts.

And I think the actual final ending balance was $3 million, perhaps, though it might have ended up lower.

But that is generally correct, that there was a higher proposed starting balance than those dollars were allocated.

And I believe part of it was also that we received a downgrade in the October forecast that needed to be addressed as well.

So that may have played a part as well.

And that's perhaps a good segue for me to offer that we are now going to receive our next October forecast next week.

And one can only hope that it doesn't set us further back with regards to this plan.

Thank you, Tom.

Council President, anything else?

No.

All right.

Thank you, colleagues.

Last call on this process, general fund jumpstart, as well as introduction and kind of check as to where we are in the whole calendar here.

That's gonna wrap up our morning session.

We're at 1223 p.m., so seven minutes early.

I appreciate, colleagues, your helping of us manifest the destiny that we all want, which is to watch the Mariners win another game this evening.

With that, we are gonna be on recess until 1.30 p.m.

City Grind is open for another 36 minutes and looking forward to seeing you all back here in an hour and six minutes.

Thanks.

If there's no objection, we will be in recess.

Hearing no objection, we are in recess until 1.30 p.m.